NAB Rural Commodities Wrap: December 2018

The NAB Rural Commodities Index fell 2.0% on a month on month basis in November, mirroring a 2.0% gain in October.

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Key points:

  • The NAB Rural Commodities Index fell 2.0% on a month on month basis in November, mirroring a 2.0% gain in October. The index tracks 28 commodities weighted by the relative size of each commodity in the Australian agricultural sector. Grains were generally lower (albeit from a very high peak), as was wool and lamb. Dairy export prices also trended lower (down 5.5%). Meanwhile, pork looks to have turned a corner (up 6.5%) and cattle remains remarkably resilient given the seasonal challenges.
  • Eastern Australia and the top end have copped an absolute drenching over the past week. This is very good news for graziers and summer crops (except for those who have been flooded), but a nuisance for the remaining winter crop harvest. The Bureau of Meteorology’s latest three month outlook is for a hot, dry summer in the north, but closer to average rainfall in parts of southern Australia.
  • While headline grain prices trended somewhat lower last month, the reality is that Australian eastern states pricing remains well in excess of global benchmarks and remains largely in the thrall of domestic demand amid drought induced shortages.
  • The latest ABARES forecasts point to farm production totalling some $58b for 2018-19, above the 10 year average and perhaps higher than expected given the severity of the drought in parts of Australia.
  • Our expectations for the AUD remain in the 70-75c range for the coming months. Our AUD forecast for Q4 is 71c, rising to 75c by Q3 2019.

For further details, please see the attached report:

Rural Commodities Wrap: December 2018

Listen to our new monthly podcast –  a short, 10 minute podcast, designed to give you a quick summary of the major drivers of Australian agricultural prices and production and where we see things headed over the next few months. To listen, just click the link below:

NAB Rural Commodities Wrap December 2018