National Australia Bank (NAB), Media Release, 30 July 2024
Increases in the price of wheat and lamb helped lift the NAB Rural Commodities Index* for the third consecutive month, rising by 0.4 per cent in June.
NAB’s July Rural Commodities Wrap released today reports while the wheat price rally slowed in June, prices continued to rise, increasing 3.5 per cent on average over the month.
NAB Group Economics Associate Director Lea Jurkovic said ongoing issues with global supply due to unfavourable weather conditions, particularly in Europe, supported wheat prices.
“Canola and feed barley also saw some softer price gains of around 2 per cent each in June,” Ms Jurkovic said.
“Trade lamb prices rose for the third straight month in June, increasing about 8 per cent month-on-month in monthly average terms.
“Wool prices in June lifted 1.8 per cent month-on-month in monthly average terms, retracing their slip in May.
“Dairy prices ticked up 0.8 per cent in June and rose across all categories except cheddar and whole milk powder. The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) forecasts the farmgate milk price to fall a little over 5 per cent in the coming year, as they are weighed on by relatively low export prices for dairy products.
“Cattle prices softened in June, slipping 2.9 per cent month-on-month in monthly average terms, however, positive export conditions continued to support prices.”
Ms Jurkovic said seasonal conditions were broadly supportive in June, with the Bureau of Meteorology (BoM) recording rainfall as 9.2 per cent above the 30-year average to 1990.
Looking forward, the BoM remains on La Nina watch and four of the seven climate models it surveys suggest that sea surface temperatures could reach La Nina levels by October.
In the Australian economy, NAB now expects the RBA’s first rate cut to take place in May 2025.
“From there, we see the RBA cutting rates by 125 basis points over the subsequent year or so, taking the target cash rate to 3.10 per cent, in mid-2026,” Ms Jurkovic said.
“While growth has slowed over the past year and the labour market has eased, progress on inflation has been slower than expected, seeing the RBA on hold for longer.
“We continue to see the Australian Dollar (AUD) appreciating against the US Dollar (USD) in the second half of 2024 and into 2025, reaching US69c by the end of this year and US75c by the end of 2025.
“A slow down in the US economy, and rate cuts from the US Federal Reserve later this year, should support the appreciation.”
* 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.
