LOWER lamb, wool, beef, canola and dairy prices have contributed to a 3.6 percent month-on-month in the NAB Rural Commodities Index.

The index is now 19.7pc below year-ago levels, according to the bank’s April Rural Commodities Wrap released today.

On the upside, much of south-eastern and south-western Australia has enjoyed an early Autumn break, setting up an ideal start to the winter cropping season in many areas.

NAB senior agribusiness economist, Phin Ziebell said lamb prices have tracked lower over the last year, but only moderately so.

“But risks remain – particularly prices into the US market, if the US experiences a downturn.

“Wool has been generally weaker, but only moderately so by historic standards,” he said.

NAB now expects the cash rate to peak at its current level of 3.6pc following the RBA’s decision to pause in April.

The Australian Dollar (AUD) has essentially tracked sideways over the last month – between roughly US66.5 cents and US68c – and NAB now sees the AUD reaching US74c at the end of 2023, down from US78c previously.

Fertiliser prices drop, but feed grain costs are up

NAB senior agribusiness economist, Phin Ziebell, said while fertiliser prices are still high by historic levels, prices are now falling so rapidly that another few months at this rate will see a return to 2020 levels.

“That said, we remain cautious about this scenario, particularly given OPEC’s unexpected output cut and the potential for further European natural gas supply challenges this coming northern winter.

“Our feed grain price index has jumped recently, up 4.4pc in March, although a little lower so far in April,” he said.

“While last season saw a big and quality downgraded Winter crop, 2023 is looking much drier and hay has been tight as producers scrambled to cash in planting grain last year.

“We still don’t expect major upside this year, but a very dry season could test this.”

Mr Ziebell said farmers planting winter crops are finding themselves in a materially better position than the outlook suggested last month.

“This is a result of good rainfall across south-west Western Australia, Victoria, South Australia and parts of New South Wales.

“While the outlook remains dry, producers will have confidence going into planting,” he said.

“Yields are likely to be below last year’s record conditions, with the dry outlook and El Nino potential key risks.

“March crop forecasts from the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) suggest an indicative domestic crop of 28.2 million tonnes of wheat, 9.9 Mt of barley and 5.4 Mt of canola, noting that we are only just entering the season,” Mr Ziebell said.

Mr Ziebell said while cattle price falls have grabbed headlines this year, the Eastern Young Cattle Indicator has been much more stable since mid-March.

“This is a welcome break from a sharp decline that began in November last year. While downside risks remain, the early autumn break has given producers a breather,” Mr Ziebell said.

“ENSO conditions are currently neutral, however, all but one of the Bureau of Meteorology’s surveyed international models point to an El Nino developing by August. Meanwhile, the three-month rainfall outlook points to drier than average conditions across most of the continent.”

Among the other major commodities, sugar prices have surged recently, reflecting global supply concerns especially in Brazil and India, and strong Chinese demand.

“Surprise cuts to oil production, announced by the Organization of the Petroleum Exporting Countries earlier this month, will likely only increase upward pressure. Sugar will be a commodity to watch in coming months,” Mr Ziebell said.

The NAB Rural Commodities Index is based on the price and production data for 28 commodities and is weighted by their relative size in Australia’s agricultural sector.

Source – NAB.