Tuesday, December 5, 2023

Rising prices boost farmers’ confidence

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Local commodities prices have continued to show gains despite some global measures softening, while the beef market can expect further record prices, according to Rabobank.

Photo: NickyPe from Pixabay

The outlook will provide more confidence for farmers, after its recent quarterly survey showed 2021 is shaping up to be an “instrumental” year in the long-term prosperity of the Australian farming sector, with almost 90% of farmers expecting the strong business conditions to either continue or improve over the year ahead.

The Rabobank Rural Commodity Index hit a 15-month high as another strong month of rainfall was received by most parts of southern Australia and soil moisture remains average to above average in most productive agricultural regions across the country.

Strong global fundamentals are expected to keep local grains and oilseeds prices firm in the second half of the year. Rabobank continues to forecast local track wheat prices to remain close to $300 per megaton over the next 12 months, supported by strong international demand, low stocks in key export markets and a large feed grain deficit. We continue to see local stocks and above-average new crop prospects limiting further upside.

Rabobank senior analyst Angus Gidley-Baird said beef price records “continue to be broken and we see no changes to suggest they will fall”.

Cattle prices remained strong through June, with a number of categories close to, or setting new records.

“Ongoing limited supplies is the primary driver for higher prices but there has also been strong competition among buyers for limited cattle. Domestic retailers are believed to be some of the most active, ensuring volumes continue to be on hand to meet the strong consumer demand.”

The resulting higher average retail beef price was $23.87 per kg in the early parts of the year, $1.36 short of the inflation-adjusted record back in September 1979.

“While we believe prices are over-inflated, and with increasing supplies they should contract, it is difficult to see any change in the market at the moment that would cause prices to drop,” Gidley-Baird said.

New York-based investment firm The Rohatyn Group is hoping for more than $55 million from the sale of the Kaiuroo Aggregation in Central Queensland, one of multiple vendors who have put their asset to the market in the hopes of capitalising on the strong market.

The 438,000-hectare Miranda Downs in Queensland’s Gulf of Carpentaria has just set a new price record of more than $180 million for a single pastoral holding, tens of millions of dollars above initial expectations.

That comes as mining magnate Gina Rinehart shops around a $300 portfolio of cattle stations and livestock spanning 1.876 million hectares in Western Australia and the Northern Territory, while prominent retail real estate player Brett Blundy has offered a pair of Northern Territory stations with expectations of around $230 million.

The Australian Farmland Index showed total annual returns from prime grazing properties hit a record 30% last year, and they remained at a high 25% over the March quarter. Capital values were up by over 15%.

Meanwhile, lamb and mutton prices remained relatively steady through June, with re-stocker and feeder lamb prices being the exception, ahead of the seasonal decline.

“Last year prices started to decline in mid-July and given similar seasonal conditions and an improvement in livestock numbers we see no reason why we would not follow a similar trend this year,” Gidley-Baird said.

Dairy commodity prices were mostly softer through June, while prices are still trading at elevated levels when compared to a year ago. The Australian dollar was weaker in June, in good news for dairy exporters.

Rabobank senior analyst, Michael Harvey said Australian milk production remains stuck in neutral.

“Rabobank maintains a forecast for growth of just over 15% in the new season, supported by healthy margins and plentiful supply of feed. The seasonal outlook currently suggest a wetter spring in the months ahead.

“And just like that we have record milk pricing in the market for 2021/22. After a hectic month in June, favourable minimum milk price offers, and subsequent step-ups, will mean many dairy farmers will be enjoying record milk prices ahead of a new season. We expect the Australian dairy farm sector will have a very profitable season.”

In the face of new crop selling in the September quarter, Australian cotton prices are tipped to be supported by tightened US and Brazilian export availability. Cotton prices have been stable and good weather in the US and potentially higher-than-expected production have not dampened the upward pressure of continued strong demand.

Rabobank expects prices to remain steady over the September quarter with support from a global lift, but likely gains in the Australian dollar and selling pressure are expected to limit upside.

Increased consumer spending and vaccination roll-out to strengthen wool prices.

Global fertiliser markets lifted again in June, with most prices across the nutrient complex increasing between 5% and 20%. Rabobank said high prices locally are here to stay for the remainder of winter and spring, with further upside possible if local supply tightens.

Rabobank expects the Australian dollar to recover to the US 78c range after a June “shakeout” to 74c, and strengthening towards US 79c on a 12-month view.


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