NAB Rural Commodities Wrap: August 2019

Resilient cattle and lamb prices sustain flat NAB Rural Commodities Index.

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Our podcast series continues this month with an interview with NAB Group Chief Economist Alan Oster on the impact of a lower Australian dollar on our agricultural sector. Listen now.

  • Australian agricultural commodity prices continue to perform fairly well overall, although some sectors have performed better than others. Overall, the NAB Rural Commodities Index was flat in July. Had seasonal conditions been favourable, Australian agriculture would be in a strong position, however the seasonal picture remains very mixed.
  • Some areas (particularly the south-east and south-west of the country), look set for a good season, especially if spring rains perform. However, much of New South Wales and Queensland remains in drought. With the winter crop window long gone, producers in northern New South Wales and southern Queensland will be looking to the summer crop, although substantial rainfall will be needed before October to see much sorghum go in the ground.
  • Cattle markets remain reasonably sound given the seasonal challenges in some areas. EYCI is just below 530c/kg and lot feeding continues to grow. MLA reports over 1.1 million cattle on feed in the June quarter. Containment feeding has also proven popular for lamb, especially given the hot trade lamb price. Whether this can be sustained through the spring flush is another question however. Wool prices have been lower recently and any further US-China trade dramas are a risk for the sector.
  • The Australian dollar has been a good deal lower recently. This reflects several factors, including USD strength, the US-China trade dispute, RBA rate cuts and domestic weakness, among other factors. We have cut our AUD forecasts substantially and we now see the AUD bottoming out at 66 US cents in Q1 2020 (previously 74c). A lower AUD is generally good news for Australian agriculture, although will see higher fuel and fertiliser prices.

For further details, please see the NAB Rural Commodities Wrap August 2019