National Australia Bank (NAB), Media Release, 17 July 2023
Livestock prices continue to place downward pressure on the NAB Rural Commodities Index*, which has fallen for the eighth consecutive month to now be 28.1 per cent below June 2022 levels.
NAB’s July Rural Commodities Wrap released today reports cattle and sheep prices are trending lower while wool fell 7.2 per cent in June, and dairy export prices and sugar were also lower.
NAB Senior Agribusiness Economist, Phin Ziebell, said cattle prices have been the single greatest driver of the lower Rural Commodities Index, constituting a quarter of the total Index and losing around half its value from the 2022 peak.
“While we see some further potential downside from here, cattle prices look reasonably close to their nadir, which we expect later this year. This alone should reduce downside pressure on the broader Index from early 2024,” Mr Ziebell said.
Mr Ziebell said farmers are also contending with baffling climatic conditions with waterlogging currently a bigger issue across Victoria and South Australian than a lack of rainfall.
“While the Bureau of Meteorology (BoM) had forecast a very dry winter in southern Australia, the opposite has occurred, with most of Victoria, South Australia and Tasmania, as well as far-western New South Wales very wet,” Mr Ziebell said.
“Some parts of Victoria hit their winter average rainfall in June. Meanwhile further north, the tap has well and truly turned off with much of Queensland now dry, as is coastal NSW.
“The Western Australian wheatbelt is a mixed bag, with generally average to above average rainfall in the south of the belt in June. The three-month outlook remains extremely dry for essentially all major Australian agricultural regions.”
In some good news for growers, Mr Ziebell said fertiliser prices tanked in June, down 14.8 per cent on the previous month on lower Di-ammonium Phosphate (DAP) and urea prices.
“Despite fertiliser prices remaining elevated by historic levels, they are now 44.5 per cent below year-ago levels. While we have been cautious about further downside given oil and LNG market uncertainty, weakness persists,” Mr Ziebell said.
“Australian wheat prices continue to see fairly limited movement, with east coast futures in the high $300/tonne range – a decent price by any standards. We see wheat closing out 2023 at around $350/t.
“Canola prices have again risen following a sharp fall since last year, however we do not expect a return to anywhere near the heady 2022 peak.”
Looking to interest rates and NAB continues to see the cash rate peak at 4.6 per cent in coming months, but with the caveat that the longer the RBA delays lifting interest rates, the less likely it is to hike into a slowing economy.
NAB forecasts the Australian Dollar (AUD) will reach US72 cents by the end of 2023 and US73c at end-2024.
Read the full NAB July Rural Commodities Wrap here.
* The NAB Rural Commodities Index is based on the price and production data for 28 commodities and is weighted by their relative size in Australia’s agricultural sector.
