NAB Rural Commodities Wrap: November 2019
High cost of water dries up basin profit margins.
In this month’s podcast, NAB Group Chief Economist Alan Oster returns to discuss the latest developments in Australian agriculture and the wider economy. Listen now.
Key highlights
- Seasonal conditions remain moribund in New South Wales and parts of Queensland, and are weakening (albeit from a much stronger base) in southern Australia. However, the BoM (very) long range outlook to autumn suggests that hopefully some normality will return in early 2020.
- Irrigation water availability and price coming into summer is a major concern. Irrigation allocations in the Murray-Darling basin are generally very low and temporary water prices continue to rise in some areas. Temporary water in VIC Murray 7 – home to considerable plantings of almonds, citrus and grapes – has exceeded $900/ML this month. The uplift in water price in this region will add on average $180/t to the cost of production for wine grapes, approaching 40% of the value of the product produced.
- We have held our assessment for the wheat crop at 15.5 million tonnes this month, although eastern states wheat prices have seen if anything, some downward pressure recently.
- Livestock markets remain resilient, with lamb continuing to perform. The National Trade Lamb Indicator stands at $7.41/kg – down on its peak but still very strong given it is spring. The restocker cattle market remains soft, but processor demand looks to be increasing and Australian beef continues to be sought in export markets, particularly China.
- Overall, the NAB Rural Commodities Index rose 2.5% in October.
For further details, see the NAB Rural Commodities Wrap November 19
About the Author
Phin is NAB's Agribusiness Economist. He is responsible for analysing and reporting on the trends and developments in the agribusiness industry and works closely in conjunction with bankers in NAB’s Agribusiness division.
Phin graduated with bachelor degrees in Commerce and Arts from the University of Melbourne and joined NAB in mid-2014. He was previously an economist at the Victorian Department of Primary Industries and Victorian Treasury.
