April 18, 2023

NAB Rural Commodities Wrap: April 2023

Australian agricultural commodity prices took another downward turn last month. The NAB Rural Commodities Index fell 3.6% month-on-month on lower beef, lamb, canola, dairy and wool prices. The index is now 19.7% below year-ago levels.

Cattle price falls have grabbed headlines this year and at around a quarter of our index, have an outsized impact. That said, EYCI has been much more stable since mid-March, a welcome break from a sharp decline that began in November last year. While downside risks remain, the early break has given producers a breather.

Speaking of the early break, winter crop growers find themselves in a materially better position than the outlook suggested last month. This is a result of good falls across south-west WA, Victoria, SA and parts of NSW. While the outlook remains dry, producers will good confidence going into planting.

ENSO conditions are currently neutral, but all but one of the Bureau of Meteorology’s surveyed international models point to an El Nino developing by August. Meanwhile the three month rainfall outlook points to drier than average conditions across most of the continent.

Earlier this month we changed our rate call and now expect the cash rate to peak at its current level of 3.6% following the RBA’s decision to pause in April. The AUD has essentially tracked sideways over the last month – between roughly 66.5 and 68 US cents. We revised our FX forecasts late last month and now see the AUD reaching 74 US cents at end-2023 (down from 78c previously) and 73c at end-2024 (down from 80c previously).

For further details, see the NAB Rural Commodities Wrap April 23