Key points

• The NAB Rural Commodities Index rebounded in May – up 4.2% in AUD terms and 3.4% in USD terms. The improvement comes off the back of higher beef, lamb, wool, fruit, vegetables and pulses prices, offsetting further declines in dairy. The AUD resumed its downward trajectory in the month, providing further support to local prices.

• The Bureau of Meteorology’s declaration of El Niño continues to cloud the production outlook, particularly for winter grains. El Niño generally causes lower winter and spring rainfall in eastern Australia and previous events have been associated with lower wheat yields. However, the impact of El Niño events varies considerably and it is still too early to judge what, if any, impact the current event will have for agriculture.

• The Australian economy is experiencing a growing difference between more optimistic short term data and weaker longer run expectations. A further rate cut and a well received Budget (for business) appears to have been reflected in improved business confidence, however longer run capex expectations in the non mining sector are weakening.

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• Rural Commodities Wrap – June 2015 (PDF, 2MB)