Price update

• The NAB Rural Commodities Index is an index of 28 agricultural commodities weighted by the relative size of each commodity in the Australian agricultural sector. In addition to the national indicator, we publish state-level indicators, reflecting the particular composition for each state. This month, NAB Economics has further expanded the index with new regional price indicators, in effect a separate NAB Rural Commodities Index for every region in Australia.
• Nationally, the NAB Rural Commodities Index rose 4.1% in April, reflecting higher beef, lamb, chick pea and vegetable prices. While sugar and pork prices fell and grains were mixed, these falls were not enough to offset the strong gains elsewhere. At a state level, New South Wales was up 3.7% while dairy-heavy Victoria rose 4.0%. Queensland with its large cattle industry saw the index rise 5.3%, the biggest monthly gain since June 2016. Grain-dependent Western Australia was up 1.7% and South Australia rose 2.7%. Tasmania saw prices jump 5.6%.

Outlook

• The outlook for production remains somewhat mixed. Last year, winter crops had a generally spectacular season, with a record 35 million tonnes of wheat harvested. It will be extremely difficult to match this again this season. While the much drier outlook for the coming year is likely to see downward pressure in the 2017-18 season, better than expected rainfall in autumn has left grain growers in a better position than had been forecast previously.
• The outlook for agricultural prices in the coming year is highly dependent on the course of the Australian dollar, although we still expect the AUD to fall to 70 US cents at the end of 2017, providing some upside towards the end of the year. We see the 70 cent mark as a low point for the AUD, with the currency to remain around that level well into 2018. Weather will also be a key driver of livestock prices. Good rain across parts of Queensland and New South Wales has boosted restocker interest for cattle, pushing prices higher. If drier weather returns (as is forecast by the Bureau of Meteorology) there may be a faster downside in saleyard prices.

For further details, please see the attached report:

• NAB Rural Commodities Wrap: April 2017