August 7, 2017
NAB Rural Commodities Wrap: August 2017
The NAB Rural Commodities Index fell 1.2% in July as generally higher grain prices were offset by weakness across livestock, dairy, cotton and mixed performance in horticulture.
Wheat has been on a rollercoaster of late, with eastern Australian futures surging 23% between the start of June and mid-July, before falling 13% by the end of the month. Meanwhile, dry conditions have seen further falls in cattle and lamb prices.
Over the coming months, we will be closely watching two areas, the performance of which will be key for the agricultural sector:
- The first of these is the progress of the season which has been very patchy so far this winter. This is particularly an issue for Western Australian, South Australian and New South Wales grain grower as well as Queensland graziers. Rainfall will be a major driver of grain yields and livestock slaughter (and therefore livestock prices) over the coming months. The latest Bureau three month outlook points to below average rainfall for much of the country, although most of Queensland and Tasmania are forecast to see closer to average conditions.
- The Australian dollar is also major consideration. The AUD started July at around 76 US cents but ended it at 80 US cents. While our forecasts remain that the AUD will fall to 70 US cents by the end of 2017, there are clearly risks to this outlook and any upside will adversely affect many local agricultural commodity prices.
For further details, please see the attached report.