NAB Rural Commodities Wrap: April 2022

Commodity prices remain generally very elevated, although some (particularly dairy, cattle and sheep) have eased somewhat recently, albeit from record or near-record levels.

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There are three key takeaways from this month’s report. Firstly, seasonal conditions are generally good to very good and many areas that needed rain got it ahead of planting. Secondly, commodity prices remain elevated but some may have peaked – the NAB Rural Commodities Index is on track to record a drop in April, the first in 13 months. Thirdly, inflationary pressures continue to mount across the economy. The biggest impact for agriculture continues to be fertiliser and fuel.

A month ago, we flagged that while much of NSW and south-east Queensland was too wet, other areas were chasing rain. Pleasingly, many dry regions have since seen decent falls ahead of planting, easing concerns around winter crop establishment. Some areas remain dry (notably much of Tasmania, south-west Victoria and south-east South Australia, parts of the WA wheatbelt and parts of central Queensland), but the overall picture is improved and the outlook is wetter than average.

Commodity prices remain generally very elevated, although some (particularly dairy, cattle and sheep) have eased somewhat recently, albeit from record or near-record levels. The NAB Rural Commodities Index rose 2.5% on a monthly basis in March, but is on track for a drop of roughly 1.5% in April, based on partial data. This is the first decline since March 2021.

Rising input costs and inflationary pressures are a substantial challenge across much of the economy. Last month’s NAB Monthly Business Survey recorded growth across all four major price and cost measures. Fertiliser and fuel remain the major challenges for agriculture, although labour costs continue to see upward pressure. Meanwhile CPI hit 5.1% y/y in the March Quarter and we now consequently expect the RBA to raise the cash rate next week. We see further upward pressure for the AUD and expect it to hit 80 US cents later this year.

For further details, see the Rural commodities wrap April 2022