Growth, inflation and labour market all easing
The NAB Rural Commodities Index rose 2.1% in October, its first monthly gain since May.
The NAB Rural Commodities Index rose 2.1% in October, its first monthly gain since May. This improvement largely reflects strengthening cattle prices in response to heavy rains across Queensland and New South Wales. On the other hand, domestic grain prices fell, reflecting global fundamentals and the expectation of a better sorghum crop reducing the demand for domestic stock feed. Domestic grain remains at a premium, although we expect this to dissipate somewhat in the new year . This month we have held our wheat production forecast at 18.7 million tonnes – the lowest in a decade.
The outlook for the new year is reasonably upbeat, although cattle prices remain in our view unsustainable. The latest outlook from the Bureau of Meteorology points to average rainfall for the continent for the rest of 2017, although much of central and northern Australia is forecast to be dry. Recent rains in Queensland and New South Wales are certainly very welcome. While the Australian dollar remains higher than most agricultural producers would like, recent pressure has been downward and we see the currency falling to 75 US cents at the end of this year and spending most of next year around the 73-74 US cent mark.
For further details, please see the attached report.
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