Once again, livestock led the downward pressure, with cattle and sheep prices trending lower (although more recent daily data show EYCI levelling off in recent weeks). Wool also fell sharply (down 7.2% in June), while dairy export prices and sugar were also lower, although the latter was coming from extraordinary highs.

Cattle has been the single greatest driver of the lower Rural Commodities Index, constituting a quarter of the total index and losing around half its value from the 2022 peak. While we see some further potential downside from here, cattle prices look reasonably close to their nadir, which we expect later this year. This alone should reduce downside pressure on the broader index from early 2024.

Climatic conditions remain baffling. While the BoM had forecast a very dry winter in southern Australia, the opposite has occurred, with most of Victoria, South Australia and Tasmania, as well as far-western NSW very wet. Some parts of Victoria hit their entire winter average rainfall in June. Meanwhile further north, the tap has well and truly turned off. Much of Queensland is now dry, as is coastal NSW. The WA wheatbelt is a mixed bag, with generally average to above average rainfall in the south of the belt in June. The three-month outlook remains extremely dry for essentially all major Australian agricultural regions.

El Nino is here, despite the BoM’s delayed declaration –now expected on 18 July. El Nino is typically associated with hotter and drier spring-summer conditions across eastern and northern Australia. This year’s event looks set to be extremely strong based on international model runs, although this is not always associated with severe rainfall deficiencies.

For further details, see the NAB Rural Commodities Wrap July 23