NAB, Media Release, 24 November 2021
On the back of strong cattle and grain prices, the NAB Rural Commodities Index is now almost 20% higher than the same time in 2020, according to the bank’s November Rural Commodities Wrap released today.
With a La Nina event now officially underway, the prospect of a wet summer for eastern and northern Australia could see grass fever push record cattle prices even higher, while grain prices are also rising.
NAB Agribusiness Economist, Phin Ziebell, said despite November rain causing harvest delays and potential quality downgrades in some areas, Australia remains squarely on track for a monster winter crop.
“Grain prices are once again on the rise, reflecting a lower Australian Dollar (AUD) and most importantly, strong global price action. Harvest prices are likely to substantially exceed what was expected just a few months ago,” Mr Ziebell said.
“Last month, we upgraded our December quarter wheat price forecast from $350/tonne to $375/t. If the current global rally persists, this should reach Australian prices.
“Canola has pulled pack somewhat from its earlier rally, which had seen prices almost $1,000/t at the Port of Newcastle. Nonetheless, producers should expect excellent returns this season.
“The cotton price rally rolls on, which is great news for growers after challenging times in 2018 and 2019. In AUD terms cotton has averaged over $850 per bale for November to date, the highest in a decade.
“Seasonal conditions are excellent, reflecting replenished storages and good dryland performance. Latest forecasts from the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) suggest that Australian cotton lint production will almost equal 2017-18 and be the third highest on record.”
Looking to livestock markets, Mr Ziebell said with the Eastern Young Cattle Indicator (EYCI) having broken $11/kg, a wet summer could see restocker demand push it even higher.
“Our view remains that fundamentals do not support prices anywhere near these levels if weather conditions return to drier than average. Ultimately, prices remain out of step with trends in global markets and at some point, Australian markets will need to adjust accordingly,” Mr Ziebell said.
In good news for dairy farmers, global dairy trade auction results are back into positive territory.
“The last three auctions have seen the index move higher in USD terms and a lower AUD has boosted this impact. Overall, global markets continue to offer good support to already strong farmgate prices,” Mr Ziebell said.
Tempering the largely positive outlook for Australian agriculture are surging input prices.
“Input prices have risen again this month, with oil and gas markets the key driver of upward pressure at home. This points to even higher Australian input prices, particularly fuel and fertiliser, in coming months,” Mr Ziebell said.
“The AUD is back down to US72 cents, in line with our forecast for around US72c at year-end. We see some limited upside next year, but for the moment 70-75c seems to be a reasonable range.”
Click here to download the NAB November Rural Commodities Wrap (PDF).
