NAB Rural Commodities Wrap: March 2020

Rural commodities resilient amid COVID-19 crisis.

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Our podcast series continues this month, with two new releases to accompany this report. The first features NAB Group Chief Economist Alan Oster taking us some of the potential macroeconomic impacts and the second considers the impact on selected agricultural commodities. Listen now.

 

Macroeconomy

Commodities

Key highlights

  • Let’s start with the good news: Australia is a net agricultural exporter, in a normal season producing enough food for more than double its population. Most food that Australians eat is grown in Australia. Coronavirus is wreaking havoc on Australia and the world but people still need to eat and at this stage we have not seen any real disruptions to Australian food supply outside of panic buying and hoarding from Australian supermarkets. Overall, Australian agriculture will play a vital role in keeping Australians in good health through the crisis.
  • The virus will have an impact on Australian agriculture, likely increasing demand in domestic markets but potentially limiting export demand and making trade more complex.
  • On the domestic front, panic buying at supermarkets will bring forward demand for Australian agricultural products across the board, although some specialty products destined for restaurants will be in surplus. However, with much of the buying now for hoarding, inventories are being transferred into households, and these will eventually be run down (assuming limited spoilage).
  • With global trade now coming under immense pressure, there is potential for more disruption to Australia’s agricultural exports. But, on balance this means more food for domestic consumers.
  • The NAB Rural Commodities Index had its best month on record in February – rising 8.5% month-on-month, largely reflecting booming livestock markets. Big rains in many areas have driven re-stocker markets into a frenzy, with hope that the big dry has now broken in New South Wales and Queensland. However, substantial climatic risks remain, and if we don’t see a good season from here livestock prices are almost certainly overdone at this level.

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