National Australia Bank (NAB), Media Release, 20 November 2023
Australian chickpea, dairy and lamb prices recorded notable increases in October, partially offsetting the downward pressure on the NAB Rural Commodities Index* from declining cattle prices.
Released today [20 November 2023], NAB’s November Rural Commodities Wrap reports the Index fell 1.8 per cent in October, driven largely by a 15.2 per cent fall in cattle prices for the month.
NAB Senior Economist, Gerard Burg, said a range of factors were contributing to commodity price volatility.
“Supply shortages, particularly in India, have driven chickpea prices substantially higher. That said, there are concerns that some key importers may find current prices unaffordable,” Mr Burg said.
“On average, dairy prices trended higher in October, led by strong month-on-month increases in both skim and whole milk powder and a modest boost to butter prices. In contrast, cheddar prices continued to trend down.
“Trade lamb prices have trended higher from around 400 cents per kilogram in early September to almost 500c/kg in late October, however, prices remain well below the levels of early 2023.”
Mr Burg said with rainfall in October around 65 per cent below the long-term average, summer crop planting is tipped to be down, due to forecast below average rainfall into summer.
“Persistently dry weather has led to low soil moisture, which will negatively impact crop growth in coming months,” Mr Burg said.
“The upward pressure on wheat prices ran out of momentum in early October, which saw prices drift back below US$400 per tonne. Similarly, barley prices eased across the month, with feed barley falling more substantially than malting varieties.
“Canola prices spiked above $700/tonne in early October but subsequently trended lower, back down close to $650/tonne in early November.”
On the global economy, consumer price growth in advanced economies slowed to around 4.2 per cent year-on-year in October, its slowest pace since September 2021, but still well above most central bank targets.
“That said, bond market pricing suggests that most major central banks have reached the peak of the tightening cycle,” Mr Burg said.
As expected, the Reserve Bank of Australia (RBA) raised rates in November, lifting the cash rate to 4.35 per cent. Reflecting recent data, the RBA’s inflation outlook has been revised up, increasing the chance of another hike, most likely in February.
The RBA sees inflation reaching the top of its target range at the end of 2025. That said, with monetary policy already restrictive, NAB forecasts rate cuts to commence in late 2024.
NAB continues to expect the Australian Dollar (AUD) to strengthen over the outlook period, largely reflecting a softening in the US currency.
The AUD is tipped to push up to US66 cents at the end of 2023 and trend higher across 2024.
