Price update

• The NAB Rural Commodities Index is an index of 28 agricultural commodities weighted by the relative size of each commodity in the Australian agricultural sector. In addition to the national indicator, we publish state-level indicators, reflecting the particular composition for each state. We now also release detailed regional price indicators (see page 4). We will further build on and improve these regional indicators as the year progresses.
• Overall, the index rose again in May, up 1.5%. reflecting moderately higher grain prices and a strong set of dairy auction results. Cotton, wool, fruit and vegetables also performed well. Beef and lamb were moderately lower, while pork continued a precipitous decline. Domestic pork prices are now down more than 20% compared to this time last year.
• At a state level, New South Wales was up 0.8% while dairy-heavy Victoria rose 2.8%. Queensland with its large cattle industry saw the index almost unchanged at +0.2%. Grain-dependent Western Australia was up 2.5% and South Australia rose 2.0%. Tasmania saw prices rise 3.1%.

Outlook

• The outlook for the coming year is highly dependent on the course of the Australian dollar, although we still expect the AUD to fall to 70 US cents at the end of 2017, providing some upside towards the end of the year. We see the 70 cent mark as a low point for the AUD, with the currency to remain around that level well into 2018.
• Weather will continue to be a key driver of livestock prices. The autumn was wetter than forecast, boosting restocker interest for cattle and pushing prices higher. If drier weather returns (as is forecast by the Bureau of Meteorology) there may be a faster downside in saleyard prices.
• The outlook for production remains somewhat mixed. Last year, winter crops had a sensational season, with a record 35 million tonnes of wheat harvested. It will be extremely difficult to match this again this season. On the other hand, the autumn break has been kinder than expected across some (but by no means all) areas, so if rain continues yields should be average to even above average in some districts. We will release our initial production forecasts for grain production in the coming weeks. ABARES forecasts point to lower production for major proteins in 2016-17 but a rise in 2017-18. We continue to see some pressure in line with a need to rebuild herds and flocks.

For further details, please see the attached report:

• NAB Rural Commodities Wrap: June 2017