Rural Commodities Wrap – May 2016

• Australian agriculture has seen a number of significant developments since the release of the last NAB Rural Commodities Wrap. Winter crops were facing very dry planting conditions on the east coast but good rain has markedly improved sentiment. Improved weather conditions also saw an uptick in cattle restocker demand following a period of slipping prices since March. Meanwhile, dairy farmers have come under considerable pressure as a result of Murray Goulburn and Fonterra’s surprise cuts to 2015-16 prices.

• Australian agricultural commodity prices declined overall in April, with the NAB Rural Commodities Index off 0.7% in AUD terms (but up 0.4% in USD terms). The Australian Dollar continued to appreciate throughout April, putting pressure on local prices. However, the RBA cash rate cut in May has seen the AUD fall quite rapidly. 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. This is likely to support local prices somewhat through challenging international conditions.

• Cattle prices are likely to come under some pressure in 2017 in response to higher US supply and improved South American access, while dairy is likely to continue to feel the pressure on farmgate milk prices. We expect global wheat prices global wheat prices to remain subdued due to ample global supply. The Bureau of Meteorology forecasts an around 50% chance of La Niña developing in the coming months, which is associated with higher rainfall in eastern Australia. Recent rainfall has come at an ideal time for wheat and barley and could see strong yields if followed up with good winter conditions.

For more details, please refer to the attached document.

• Rural Commodities Wrap – May 2016 (PDF, 1MB)