September 23, 2019

NAB Rural Commodities Wrap: September 2019

Seasonal conditions and declining winter crop forecasts reflect drop in NAB Rural Commodities Index.

  • Seasonal conditions remain at the forefront of concerns for Australian Agriculture. Weather conditions have been generally unfavourable across many winter cropping regions over the last few weeks, with frost, heat and a lack of rain menacing the crop, although the last week has seen some rain, particularly in South Australia. Yields in Western Australia and South Australia are under pressure, and are likely to be further dented by the dry spring outlook. Victoria should see the best yields nationally, although a dry spring will take some of the cream off. Meanwhile New South Wales and southern Queensland remain under intense pressure, with rain desperately needed ahead of summer crop planting.
  • Livestock markets remain fairly resilient despite the challenging season. Cattle markets remain reasonably sound given the seasonal challenges in some areas. Lot feeding continues to perform and processors are chasing quality finished stock. EYCI has drifted lower but at around 468c/kg amid drought conditions represents a fairly resilient price. Lamb prices remain hot, hovering at around 795c/kg for trade lamb. Whether this can be sustained through the spring is far from clear, although there is a possibility that supply will remain constrained, keeping prices elevated. Wool prices are starting to look quite crook and are likely to remain so absent any resolution to US-China trade dramas.
  • Temporary water prices in the Murray-Darling basin continue to surge, reflecting moribund inflows and very low allocations. This will continue to put pressure on northern Victorian irrigated dairy, although strong farmgate prices and a good season have confidence return to south-west Victoria and (to a lesser extent) Gippsland.
  • We now see the RBA cutting rates at least twice more, down to 0.5% by December this year, while the AUD is likely to remain in the 60s for some time.

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

This month’s Rural Commodities Wrap doesn’t include a new podcast, but in case you missed it, I spoke to NAB Agribusiness Customer Executive Neil Findlay earlier this month about the latest NAB Agribusiness Banker Survey. Listen now.