Bond markets have been supported by some market-friendly data and while Fed speakers were again mixed, it was the more dovish remarks that captured attention.
NAB Rural Commodities Wrap July 2018
The NAB Rural Commodities Index gained 1.4% month on month in June, following a 3.1% gain in May. On a year on year basis, the index was down 2.9% in June. The monthly gain reflects strong lamb, wool and cotton prices.
- The last couple of weeks have seen some helpful rains across Australia, but overall the season remains very tough in many parts of the country. Northern New South Wales and parts of southern and western Queensland are the worst affected by drought.
- As a result, local seasonal conditions continue to have a more than usual impact on prices. Eastern Australian grain prices remain at a substantial premium compared to international benchmarks, reflecting a shortage of grain in the domestic feed market. It is likely that plantings in Northern New South Wales and Queensland will be down on last season. Meanwhile cattle prices are much lower than year-ago levels, although EYCI has seen an uptick in the last few weeks.
- The NAB Rural Commodities Index gained 1.4% month on month in June, following a 3.1% gain in May. On a year on year basis, the index was down 2.9% in June. The monthly gain reflects strong lamb, wool and cotton prices.
- Wool and sheep meat remain star performers, although last week EMI fell below 2,000c/kg for the first time since May. A shortage of finished lambs has seen the National Trade Lamb Indicator surpass 700c/kg. Opening milk prices have been in the high $5/kgms range – $5.75 for Saputo and $5.85 for Fonterra.
- The AUD has been quite volatile in response to emerging market concerns and the US-China trade dispute. If the dispute widens further, there could be some further downside for the AUD. That said, our central case forecasts point to the AUD at 0.73 in Q3 and 0.75 in Q4.
For further details, please see the attached report: