National Australia Bank (NAB), Media Release, 18 September 2023
The removal of tariffs on Australian barley by Chinese authorities has seen barley prices trend higher since the start of August, according to NAB’s September Rural Commodities Wrap.
The NAB Rural Commodities Index* fell 1.6% in August and is now 30.7% lower compared to when Australian rural commodity prices peaked in June 2022.
The key drivers of the decline in the Index in August were cattle (down by 5.4% month-on-month), vegetables (down 6.4%) and lamb (down 11.2%).
In contrast, feed barley prices have increased to now be up to $340/tonne, compared with $294/tonne at the same time last month.
Sugar prices have moved back above $900/tonne, underpinned by strong global market conditions, with demand continuing to grow while exports from Thailand and India will be impacted by drought, with the latter banning exports to secure domestic supplies.
NAB Senior Economist, Gerard Burg, said while the Bureau of Meteorology (BoM) has not yet declared an El Nino event, its El Nino alert remains, and it anticipates it will develop in spring.
“This is likely to result in hotter and drier conditions across eastern and northern Australia, negatively impacting a range of key agricultural regions,” Mr Burg said.
“Dry conditions due to the emerging El Nino have impacted cattle and trade lamb prices and are expected to substantially impact crop yields.
“Despite a marginal upward revision, the Australian Bureau of Agricultural and Resource Economics and Sciences’ (ABARES) September forecasts still expect winter crop production to fall by almost 34% in 2023-24, down from record highs in 2022-23.
“Australian wheat prices continued to broadly track sideways in August, having settled at around $400/t since late 2022. Canola prices edged up above $700/t in mid-August, before dropping back below this level in early September.”
Mr Burg said global dairy price trends remain divergent.
“The oversupply of raw milk in China has seen a rapid increase in milk powder production, contributing to the downward pressure in global prices, which are back to levels last seen in mid-2020,” Mr Burg said.
“Weakness in export markets and strong domestic output is expected to weigh on farmgate prices, after experiencing historic highs in 2022-23.”
The softening trend for the Australian Dollar (AUD) that started in mid-July continued across August and into early September, dropping below US64 cents, reflecting a stronger US dollar and weaker sentiment around China.
NAB now forecasts the AUD will end 2023 at US66c but trending higher across 2024.
Click here to read the full NAB September Rural Commodities Wrap.
* 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.
