Reduced volatility in cattle markets and good rain in south-eastern Australia and the West Australian wheatbelt saw the National Australia Bank (NAB) Rural Commodities Index fall by just 0.1 per cent in May 2019.
NAB’s Rural Commodities Wrap shows the Eastern Young Cattle Indicator (EYCI) stabilising just below 500c/kg, after a period of volatility in early 2019. NAB Agribusiness Economist, Phin Ziebell, said the future trajectory of the EYCI remained very sensitive to rainfall.
“Slaughter data shows the national herd in a liquidation phase through to April (2019), although the break in south-eastern Australia and rain in northern Queensland could mitigate this.
“On balance, we see the EYCI sitting in the 400s c/kg region for the remainder of 2019, before recovering closer to 500c/kg in Q1 2020,” Mr Ziebell said.
Lamb prices continue their record streak, with high export demand and tight supply bringing strong returns, supported by a historically good Eastern Market Indicator sitting near $18/kg.
“We are cautious about lamb prices remaining at record levels, but a good winter in the south may prompt flock rebuilding and disrupt the traditional spring lamb flush,” Mr Ziebell said.
Global Dairy Trade auctions were lower in May 2019, and input costs remain a challenge for irrigators in northern Victoria.
Despite this, stronger opening prices for 2019-20 are driving increased confidence, with Saputo opening at $6.80/kgms and Fonterra at $6.60/kgms.
Seasonal conditions remain front of mind, particularly in northern New South Wales (NSW), south-east Queensland and the Darling Downs.
“The Bureau of Meteorology’s three-month rainfall outlook points to drier than average conditions across much of the country. If this eventuates, grain production in NSW and Queensland could face yet another challenging season,” Mr Ziebell said.
“Domestic feed prices dropped another 10.8 per cent in May(2019), and overall the NAB weighted feed grain price index dipped below $300/t for the first time since July 2018, at $284/t.
“However, month to date data for June (2019) indicates that prices have started to trend up again, and the ability of graziers in drought-impacted areas to access good feed at these prices, particularly given high transport costs, remains a challenge.”
Rain in WA, Vic, SA and southern NSW led to good winter crop plantings, and ABARES’ June 2019 crop report puts the wheat volumes at 21.2 million tonnes, which is improved but still slightly below average.
“A poor domestic season could result in the eastern states grain market detaching once again from global trends,” Mr Ziebell said.
On a state by state basis, Victoria was the best performer on the Index in May 2019, recording a 2.2 per cent increase, while NSW, Western Australia and Queensland fell 0.3, 0.6 and 1.0 per cent respectively.
Sitting at below USD0.70 since early May 2019, the lower Australian Dollar has helped Australian agricultural exporters.
This article was first published in The Fence magazine.
