THE National Australia Bank (NAB) Rural Commodities Index rose 1.4 per cent in June, driven largely by impressive wool, lamb and cotton prices.
The latest NAB Rural Commodities Wrap shows that wool and sheep meat remain the star performers, although the Eastern Market Indicator dropped below 2000c/kg late last month.
Meanwhile, trade lamb prices jumped eight per cent in June.
NAB agribusiness economist, Phin Ziebell, said that while wool prices dropped last week, wool growers remain generally confident helped by trade lambs continuing to bolster prices.
“Although prices have eased somewhat, largely reflecting Chinese currency depreciation, the industry remains strong.
“While there could be some risk to prices if buyers decide to substitute to other fibres for cost reasons or the US-China trade dispute widens, we have yet to see any major jitters,” Mr Ziebell said.
“Lamb was the second strongest performer in the NAB Rural Commodities Index in June, up eight per cent to 721c/kg on the back of the usual winter shortage and strong fundamentals.”
Cotton prices have continued trending higher, with the Cotlook A index averaging $652/bale in June.
Production is expected to be lower in 2018-19, with the latest ABARES forecast pointing to a 21 per cent fall due to lower water storage levels and reduced plantings.
Despite recent rain across parts of New South Wales, southern Queensland and the Western Australian wheat belt bringing welcome relief for winter crops, the predicted persistence of tough seasonal conditions will likely see a continuation of lower cattle prices and reduced plantings in northern New South Wales and Queensland.
“Local seasonal conditions continue to have an impact on grain prices, which remain at a significant premium compared to international benchmarks,” Mr Ziebell said.
“We expect these premiums to remain for some time, unless the season markedly improves.
“While dry conditions continue to impact cattle prices, which remain weak on the back of high female slaughter numbers, the Eastern Young Cattle Indicator (EYCI) has tipped back above 500c/kg after bottoming out at 465c/kg at the end of May, showing a resilience in the market that surpassed our expectations.
“Overall, persistent dry conditions continue to be the main force behind grain and cattle prices, with domestic grain premiums likely to remain and cattle prices likely to stay suppressed.”
The Bureau of Meteorology’s latest three month outlook forecasts only Tasmania and Western Australia to receive average rainfall, with much of New South Wales, northern Victoria, and parts of coastal Queensland rated at a less than 30 per cent chance of exceeding average rainfall.
Opening milk prices in the upper $5/kgms range are the best they have been in some time, however, seasonal conditions remain challenging and are likely to be compounded by high domestic grain and water prices.
The wholesale pork price indicator fell 2.6 per cent in June in what was the fourth consecutive month of decline, due largely to high domestic supply and ongoing import competition.
The AUD has been volatile, and lower overall, however, it is predicted to be back in the mid-70s range towards the end of 2018.
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