Summary

This month, the NAB Rural Commodities Index fell to a 15 month low, slipping 7.6% (the biggest monthly fall since the expanded index began in 2010) amid a stubbornly high Australian dollar, retreating grain prices and weakness in cattle. Only four of the 28 commodities that make up the index rose in the month. Seasonal conditions are mixed to poor. While most of southern Australia (below a line stretching roughly from Western Australia’s Shark Bay to Canberra) saw above average rainfall last month, north of the line it remains very dry indeed. Frosts in New South Wales and Queensland have caused potentially considerable damage to winter crops.

Over the coming months, we will be closely watching two areas, the performance of which will be key for the agricultural sector:

• Seasonal conditions remain a major consideration. While spring rain is probably too late for much of the crop in northern New South Wales and Queensland, improved conditions could allow some opportunities for summer crops. Likewise, better seasonal conditions would likely stem some of the recent falls in cattle prices.
• The Australian dollar remains in the high 70s, approaching an uncomfortable level for agriculture. In August NAB changed its forecast for the AUD from 70 cents by year end to 75 cents. We will be watching for signs of strength in the USD that are necessary for a depreciation in the AUD to occur.

For further details, please see the attached report.

• NAB Rural Commodities Index: September 2017 (PDF, 2MB)