National Australia Bank (NAB), Media Release, 16 October 2023
Australian sugar, barley and feed grain prices were stronger in September, in contrast to cattle prices which have reached their lowest levels since late 2014, according to NAB’s October Rural Commodities Wrap.
Released today [16 October 2023], the Wrap reports the NAB Rural Commodities Index* fell 4.6 per cent in September and is now 34 per cent below the peak in rural prices back in June 2022.
Cattle was the key driver of the decline in the Index, with the Eastern Young Cattle Indicator (EYCI) plunging 21 per cent month-on-month in September and falling further in early October.
NAB Senior Economist, Gerard Burg, said the formal declaration of an El Nino event and associated challenging seasonal conditions is driving volatility in rural commodity prices.
“Various reports suggest that low confidence due to current and upcoming seasonal conditions may have encouraged producers to sell off stock, driving cattle prices lower,” Mr Burg said.
“Last month was the driest September on record with rainfall almost 71 per cent below average and the third hottest. The Bureau of Meteorology’s outlook for both October and November look extremely dry in most regions of the country.
“El Nino is associated with hotter and drier conditions across eastern and northern Australia, which is likely to negatively impact a range of key agricultural regions and Australian crop production in coming months.”
Mr Burg said Australian wheat prices edged higher in September, moving back above $400/tonne for the first time since March.
“Barley prices have continued their upward trend since early August, boosted by the removal of Chinese tariffs on imports from Australia, while the dry conditions in coming months are likely to impact crop yields, meaning further upside risk to feed grain prices more generally,” Mr Burg said.
“Following on from a period of relative price stability between February and August 2023, feed grain prices moved considerably higher in September, increasing by 2.7 per cent month-on-month.
“Canola prices dipped in month average terms in September but have continued to fluctuate close to $700/t.”
Mr Burg said sugar prices continued to climb through early September, pushing above $900/t, before essentially tracking sideways across the rest of the month.
“The peak represents a record high in Australian dollar (AUD) terms. Supply side pressures persist, with limited supplies from major exporters such as Thailand and India, while global demand remains strong, meaning that prices are likely to remain elevated,” Mr Burg said.
The AUD traded in a relatively narrow band close to US 64 cents in September, with little change to sentiment around the US currency or the outlook for China – two factors that drove the AUD lower in recent months.
NAB’s forecast for the AUD is unchanged this month. NAB sees some modest upside in the near term, pushing up to US 66c at the end of 2023, before trending higher across 2024 to US 73c at year end.
* 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.
