Wool is best performing rural commodity this year – NAB

Sheep Central April 1, 2017

Wool is performing better than other commodities. Picture – AWI.

WOOL has been the strongest performing commodity in agriculture since February this year, NAB Agribusiness said this week.

Australian agricultural markets have started 2017 in broadly stable territory according to the March Rural Commodities Wrap from NAB Agribusiness, but wool has been the strongest performing commodity.

NAB’s Rural Commodities Index was steady in February with excellent price runs in lamb and wool neutralising falls in beef and dairy. However, the index is so far on track for a 1.5pc drop in March.

At a state level, Western Australia and South Australia are the only states in which the index has risen in both February and March, which is due to a bump in wheat prices.

NAB Agribusiness economist Phin Ziebell said the wool market is continuing to enjoy some of the best conditions in decades, following a return of confidence to the industry last year after several years of unfavourable prices. The benchmark AWEX Eastern Market Indicator rose 2.5pc in February and a further 6.5pc in March.

“The price upturn enjoyed by wool producers has continued despite recent $US weakness.

“Wool is quite sensitive to currency movements and our expectations of a lower $A this year point to further upside,” Mr Ziebell said.

With prices rising, ABARES projects that wool production will increase in the coming year, arresting, at least temporarily, a long decline in production.

Click here for an ABARES production outlook summary table.

Click here to see a rural commodity price changes comparison.

Stable to moderately high lamb prices in 2017

NAB said lamb prices surged in the New Year and after a pause have resumed their upward trend. This price increase has come several months before the usual autumn-winter increase, it said.

NAB expected stable to moderately higher lamb prices this year. It said export markets for lamb are reasonably diversified, with the United States and China accounting for a substantial volume. However, the Middle East remains a very important market, particularly for mutton and live sheep. Jitters in the oil market may see some issues in the Middle East, but these are likely to be minor, the bank said.

Click here to see

$A expected to move lower

NAB still expects the $A to move lower in coming months, more so on cross rates than against the $US, and is still forecasting it to fall to US70 cents by the end of the year.

The previous forecast for an interest rate cut in late 2017 has been removed, given the Reserve Bank’s desire to slow household debt accumulation despite ongoing concerns about economic growth and the labour market in 2018.

NAB said the general rural commodity outlook for the coming year is highly dependent on the course of the Australian dollar, although the bank still expected the $A to fall to US70 cents at the end of 2017, providing some upside towards the end of the year. NAB sees the US70-cent mark as a low point for the $A, with the currency to remain around that level well into 2018.

Click here to read the full March Rural Commodities Wrap from NAB Agribusiness.

Click here to see the ABARES production outlook.

Source: NAB.


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