Many Australian farmers are still battling to get grain crops planted due to wet conditions, while the global wheat outlook price remains elevated and buyers will be hoping prices will ease as the northern hemisphere supply comes to market.
Rabobank, in its latest Australia Agribusiness Monthly report entitled “Global headwinds and local price pressure”, marginally downgraded its forecast for CBOT wheat prices but expects them to stay above average.
“CBOT wheat’s recent decline has been driven by significant fund selling in addition to the Northern Hemisphere harvest starting to come to market, but hopes for the resumption of Ukrainian grain exports through the opening of a Black Sea trade corridor were key,” said analysts Cheryl Kalisch Gordon and Dennis Voznesenski.
Following talks in Istanbul in recent days, Turkey’s government said a “basic, technical” agreement had been reached between Ukraine and Russia to move millions of tonnes of grain exports out Black Sea ports that have been sitting idle in the wake of Russia’s invasion.
Locally, many farmers were struggling to plant crops due to wet conditions, especially in NSW and Queensland, with Central NSW impacted most severely, but several drier weeks in June allowed an uptick in progress.
“Despite local prices following global some of the way lower this past month, the global outlook continues to support a local pricing ‘summer of content’,” the analysts said.
In the dairy sector, the new production season has begun with record milk prices across all states, providing an opportunity for profitability despite cost headwinds, making for a fourth season of profitability in a row. Record-high milk prices are putting pressure on margins in retail and food service businesses, Rabobank analyst Michael Harvey said, coming against a backdrop of high costs in other parts of the business.
“Efforts to pass costs through to consumers will continue,” he said.
There is “no need to panic yet” for the cattle industry, after the EYCI fell 10% June. According to Rabobank, it is effectively, returning to the downward trend seen between February and May. Young cattle prices will continue to drift down over the coming months before the spring break leads to any possible further buying activity, Rabobank’s Angus Gidley-Baird said.
Lamb availability appears to be good with prices not rising through June. Supplies are expected to decline in the coming months, which would support upward price movement, but Rabobank does not expect large rises.
The 2022 wool price outlook is supported by post-COVID consumer spending, but 2023 is looking “increasingly gloomy” as import volumes worldwide slow down. The local sector is at risk of the west sanctioning China’s exports, including apparel, and demand for Australian wool would decline, and China also banning exports – of its own accord.
Cotton prices slumped 26% in June, almost entirely over a couple of days driven by concern for the economic outlook and the closing out of July contracts. June delivered a much-needed window of clearer weather to allow Australian harvest progress, but for many “it wasn’t long, or dry, enough and so a lengthy harvest and quality downgrades are still ahead,” Kalisch Gordon said.
While some yields are impressing, the cooler summer means closer-to-average yields in many areas.
Rabobank expects only limited changes to local fertiliser prices in the near term because of supply chain and logistics costs and lead times, the softer Australian dollar, and local inventory considerations.
