NAB Rural Commodities Wrap: October 2019

Our podcast series returns this month, with NAB Agribusiness Customer Executive Neil Findlay discussing the latest developments in Australian agriculture. Listen now.

• Seasonal conditions have very clearly been – and remain – poor in much of New South Wales and Queensland. Conditions had been much better in southern Australia, but spring has been generally unkind, reflecting a lack of rain combined with heat and frost. This has led us to significantly downgrade our assessment for the wheat crop this month, with a 15.5 million tonne headline figure now a serious prospect.
• Despite the weakening conditions, livestock markets remain resilient, particularly for lamb. The National Trade Lamb Indicator stands at $8/kg – an exceptional figure, especially during spring. It is looking increasingly unlikely that the lamb market will see a “traditional” spring flush this year. The restocker cattle market remains soft, but demand for beef in export markets is strong. ABARES reports year to September Australian beef exports to China up 4% y/y.
• Water availability will remain a key risk coming into summer in many areas, both dryland and irrigated. Irrigation allocations in the Murray-Darling basin are generally very low and temporary water prices have responded accordingly. While 2019 has been a particularly challenging year, the increase in permanent plantings (almonds, citrus, table grapes etc) in the basin is likely to have a structural impact on water prices.
• Overall, the NAB Rural Commodities Index fell 2.9% in September, reflecting weakness in fruit, beef, wool, sugar and lamb prices, only partially offset by upward pressure in grains.

For further details, please see the NAB Rural Commodities Wrap October 2019.