NAB Rural Commodities Wrap: April 2021

Commodity prices stay strong amid rising Australian Dollar.

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Overview

Agricultural commodity prices continue to perform generally very well, rounding out a generally strong period for many agricultural producers. Cattle prices have been perhaps the most obviously compelling, with the benchmark Eastern Young Cattle Indicator cracking a record 900c/kg earlier this month. However, trends in global grain markets also point to encouraging news for Australian grain growers. Dairy prices have levelled off after a period of strong growth, hopefully underpinning farmgate opening prices.

But overall, the NAB Rural Commodities Index was down slightly in March, off 0.7% on a monthly basis. The index is now 3.4% lower than the same time last year.

The AUD is back on the rise following a period of very low volatility. With commodity prices (especially iron ore) strong and risk sentiment increasing, the AUD has found increasing support. Our forecasts point to the currency reaching 80 US cents by mid-year and 83 cents at the end of 2021.

Seasonal conditions, which were bolstered by big rainfall events earlier this year, remain generally good. But some small caveats are emerging. April has been very dry in many areas and soil moisture levels have taken a hit from the lack of rain. This is unlikely to be a concern at this stage, given the rains earlier this year. But it does bear a close eye, particularly for producers in the south-east of Australia.

For further details, see the NAB Rural Commodities Wrap April 2021