NAB Rural Commodities Wrap: March 2021

Rising commodity prices underpin positive outlook.

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Overview

With a record-breaking 2020-21 harvest done and dusted and winter crop planting approaching, attention is turning from the generally strong season we’ve just had to what the coming season will bring. Summer was generally wetter and cooler than average (with the notable exception of Queensland), giving southern Australian producers a much needed summer respite and generally good soil moisture levels.

The situation in Queensland remains much more complex. La Nina failed to deliver in many parts of the state and with the wet season drawing to a close, there are concerns that many producers have missed out. While rain over the last week has filled in many gaps and three-month rainfall outlook for the state is wetter than average, challenges for the Queensland cattle industry could continue well into the year. Cattle prices remain near record levels, with EYCI around 860c/kg. If conditions remain dry in much of Queensland cattle country, there are substantial downside risks if southern Australia becomes drier.

Commodity prices have been generally very encouraging, particularly across the global grains complex. While the Australian dollar’s appreciation has cut into local prices to some extent, Australian grain is now well priced in key southeast Asian export markets due to a steep rise in global shipping costs –a stark reversal from just two seasons ago. We see the AUD reaching 83 US cents by the end of this year.

Fibres prices have seen more upside recently than we expected. The next page will detail some key metrics around clothing demand and potential impacts for industry.

Overall, the NAB Rural Commodities Index rose 2.6% in February. The index is now 1.8% higher than the same time last year.

For further details, see the NAB Rural Commodities Wrap March 2021