Below trend growth to continue
Our expectations for prices in the coming year are underpinned by our forecasts for a generally lower AUD, tracking in the high 60s range in late 2016 and 2017.
The outlook for agriculture has been boosted by good rain across much of eastern Australia and the Bureau of Meteorology’s forecast for a wetter than average winter with the chance of La Nina developing around 50%. Our initial outlook for the 2016-17 Australian wheat season places the crop at 26.1 million tonnes, with further upside possible if rainfall is above average.
The lower Australian Dollar pushed most agricultural commodity prices higher in May, with the NAB Rural Commodities Index up 3.0% in AUD terms but off 2.2% in USD terms. The rain flowed through to cattle prices, with higher restocker demand pushing up the Eastern Young Cattle Indicator. Although prices of major agricultural commodities remain mixed on global markets, we continue to expect a downward drift in the AUD to provide support locally.
NAB’s Rural Commodities Index includes 28 commodities (wheat, barley, sorghum, rice, oats, canola, chick peas, field peas, lupins, wool, cotton, sugar, wine grapes, beef, lamb, pork, poultry, dairy, apples, bananas, oranges, mangoes, strawberries, broccoli, carrots, lettuce, potatoes and tomatoes). The index is weighted annually according to the gross value of production of each industry in Australia.
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