NAB Rural Commodities Wrap May 2019

In this month’s podcast, I chat to NAB Group Chief Economist Alan Oster about exchange rates and interest rates and their implications for Australian agriculture. Listen below.

Key Points

• Seasonal conditions continue to be the major driver of sentiment in Australian agriculture. The traditional start to the winter planting has now passed, and while the break has come in some areas, others remain dry. Overall, we are still concerned about seasonal conditions, particularly in south-east Queensland, New South Wales, Victoria and South Australia. On the other hand, large areas of Queensland have seen good rain over the last few months, resulting in higher confidence.
• While we won’t start our forecasts for 2019-20 Australian wheat production until next month, if conditions continue on this trajectory, an “average” season in eastern Australia could be difficult. On the other hand, conditions in Western Australia are closer to neutral.
• Seasonal conditions are also an ongoing cause of volatility in cattle markets. The Eastern Young Cattle Indicator is now back up to almost 500c/kg, largely reflecting recent rains, combined with generally better conditions in the largest cattle state Queensland. However, the trajectory of the indicator for the rest of 2019 will be very sensitive to rainfall. If a normal winter doesn’t eventuate in New South Wales and Victoria, there could be another drop.
• Global Dairy Trade auction results continue to perform well, but high input costs – especially in northern Victoria – remain a major concern. Meanwhile, low irrigation water availability will likely limit cotton plantings once again.
• Overall, the NAB Rural Commodities Index rose 1.1% in April, largely reflecting higher cattle, lamb, dairy and cotton prices, offsetting further declines in grain.

Learn more in the Rural Commodities Wrap May 2019