Commodities prices up again in March

April 16, 2018

The National Australia Bank (NAB) Rural Commodities Index rose for the second consecutive month in March with prices up 3 per cent, largely reflecting favourable cotton, cattle, grain and horticultural prices.

The latest NAB Rural Commodities Wrap released today shows that on a state basis, cattle-heavy Queensland was the best performer, up 4.1 per cent.

NAB Agribusiness economist Phin Ziebell says cattle prices jumped following good rains across much of the state, but restocker interest hasn’t kept them there.

“The Eastern Young Cattle Indicator is now around 538c/kg, and by the end of the year we still see a fall to around the 500c range as likely,” Mr Ziebell said.

“Our view is that global trends, combined with expensive domestic feed grain and dry conditions in many areas, will see downward pressure on Australian cattle prices this year, although not by a large amount.”

The Index for wheat prices was up 2.4 per cent in March, and domestic wheat premiums remain.

“Lot feeders will continue to need grain for some time to come, and after the disappointing summer crop, prices are likely to remain at a premium for now,” Mr Ziebell said.

“Barley prices are trading close to ASW levels due to the feed demand, which is a bonus for those with barley in storage.

“Looking ahead to the 2018-19 winter cropping season, the lack of subsoil moisture across major grain-growing districts of New South Wales, South Australia, Victoria and increasingly Western Australia leaves a lot of heavy lifting to be done by in-season rainfall.”

The slightly lower AUD cushioned weaker global dairy prices locally, with the NAB weighted dairy export price indicator up 2.1 per cent in March.

“Prices have weakened in line with fading New Zealand weather concerns and ongoing strong supply from the northern hemisphere,” Mr Ziebell said.

“Our forecasts do not point to much upside for global dairy prices in USD terms in the coming year, reflecting strong supply from the EU in particular, better weather conditions in New Zealand, cheap feed in the US and inventory overhang.

“Any local gains are more likely to come from currency or competition between processors.”

Mr Ziebell says the Australian dollar (AUD) remains higher than many producers would like.

“We have maintained our forecast that the dollar may move down to around 75 US cents. For 2019 we see the AUD as hovering around the mid-70s.

“Of course, this forecast does not include the outbreak of a real trade war between the USA and China – which would see a significantly lower AUD.

“China has already put a tariff on over a hundred US agricultural products. While there’s potential upside in some Chinese markets, such as horticulture, wine, and feed grains, events are moving too fast to assess the full impact for agriculture at this stage.

“Looking at interest rates, going forward the RBA is likely to be very cautious and we have however maintained our view that two additional rate rises are likely in 2019.”

Click here to download the April Rural Commodities Wrap report (PDF).


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