NAB Rural Commodities Wrap: February 2020

Good January rainfall across key agricultural production areas drove the NAB Rural Commodities Index 4.6% higher this month, despite the impact of bushfires and coronavirus.

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In this month’s podcast, NAB Agribusiness Customer Executive Neil Findlay returns to discuss the latest developments in Australian agriculture and the wider economy. Listen now.

Key highlights

  • Bushfires saw a horror start to 2020 in parts of the country, with their direct agricultural impact concentrated on (but not limited to) dairy in southern NSW, grazing in Gippsland, northern Victoria, southern NSW and South Australia and wine grapes in South Australia. While the impact on those affected has been calamitous, the fires are unlikely to have materially changed national agricultural production.
  • 2020 has delivered more crises since the fires, most notably in the form of the coronavirus outbreak which started in Wuhan in late 2019. The virus has now infected over 40,000 people – mostly in China – and continues to spread. The outbreak is now having a major impact on the Chinese economy. We consider some potential impacts for Australian agricultural exports in a special in focus section on page three.
  • Fires notwithstanding, rainfall in January 2020 was average to above average in many parts of the country and February has brought monster falls to NSW and Queensland. Many areas have now seen excellent rain and cattle and sheep markets have responded accordingly. It’s pedal to the metal for the Eastern Young Cattle Indicator, which now stands at 635c/kg  having closed out last decade at 482c/kg. Lamb is back in business, up from 696c/kg to 821c/kg.
  • The AUD has fallen this year, down from 70c at the end of 2019 to around 67c now. This provides further support to agricultural prices, although we see the AUD reaching 71c by the end of 2020.
  • Overall, the NAB Rural Commodities Index rose 4.6% in January on a national basis, the biggest monthly rise since mid-2016.

For further details, see the NAB Rural Commodities Wrap February 2020