NAB Rural Commodities Wrap: June 2019

Cattle markets and southern rain stabilises NAB’s Rural Commodities Index

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  • We are now well into winter and parts of the country have seen a good break, although other areas are still very dry. The south-east of the country saw generally good rain in May, boosting crop prospects, and the WA wheatbelt has seen some good rains over the last few weeks. However, NSW north of the Riverina and south-east Queensland are still generally very dry.
  • Cattle markets have been less volatile of late, notwithstanding favourable conditions in some areas and challenging conditions in others. The Eastern Young Cattle Indicator is hovering somewhat below 500c/kg. The trajectory of the indicator for the rest of 2019 will be very sensitive to rainfall. Meanwhile, lamb prices have gone into overdrive, reflecting limited supply and strong export demand. Winter has brought a little more stability but given tight supply it is unclear whether the traditional spring flush will bring any meaningful drop in prices this year.
  • Global Dairy Trade auction results have been lower recently, although this follows several months of positive results. High input costs have been a major issue and Dairy Australia are forecasting another production fall in 2019-20. That said, Saputo’s very strong 2019-20 opening price of $6.80/kgms has brought confidence.
  • Overall, the NAB Rural Commodities Index fell 0.1% in May.
  • The Australian Dollar has been below 70 US cents since early May, which is a boost for Australian agricultural exporters and for local commodity prices. The RBA has cut the cash rate to 1.25% and we forecast two further cuts this year. On the other hand, high iron ore prices have boosted the AUD. On balance, we see a gradual appreciation in the AUD this year, reaching the mid-70s range by 2020.

Learn more in the Rural Commodities Wrap June 2019