Rural Commodities Wrap – August 2014

Australian beef prices are forecast to increase 3.5 per cent in 2014-15 on the back of a 4 per cent fall in production as producers rebuild herds, according to the latest NAB Agribusiness Rural Commodities Wrap.

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Beef prices set to rise

Australian beef prices are forecast to increase 3.5 per cent in 2014-15 on the back of a 4 per cent fall in production as producers rebuild herds, according to the latest National Australia Bank (NAB) Agribusiness Rural Commodities Wrap.

NAB also expects the AUD to depreciate in late 2014 and into next year. The cash rate is not expected to change until the end of 2015.

General Manager of NAB Agribusiness, Khan Horne said the benchmark Eastern Young Cattle Indicator (EYCI) has grown moderately in 2014 and is now 3.7 per cent higher than the same time last year.

“Average slaughter rates in the eastern states are currently 8.8 per cent higher in 2014 compared to the same period last year. Looking ahead, the supply of cattle will clearly be tighter over the next couple of years as the industry rebuilds the herd,” said Mr Horne.

In terms of exports, overall conditions in key international markets in 2014 have been favourable for Australian beef. “Exports to the United States (US) have performed particularly well, with exports of hamburger beef filling the void left by the smallest US cattle herd in more than half a century,” Mr Horne said.

To July this year, exports to the US grew 38 per cent year-on-year, with prices increasing 15.2 per cent in AUD terms over the same period. “While it’s been a tough year for many beef producers, NAB has a very bullish outlook for the industry buoyed by tight supply and strong demand conditions in key overseas markets,” Mr Horne said.

In other commodities, the NAB Rural Commodities Index fell for the third straight month in July, led by lower wheat, lamb, cotton and dairy prices. An improved supply outlook in the US, driven by improved weather, has put downward pressure on international grain prices. Overall, the index fell 2.9 per cent in both AUD and USD terms.

For further analysis, download the full report.