Commodity prices strong

Agricultural commodity prices continue to perform well for Australian producers, with cattle prices the most compelling after the benchmark Eastern Young Cattle Indicator surpassed a record 900¢/kg in April.

The NAB Rural Commodities Wrap reports trends in global grain markets point to encouraging news for Australian grain growers, while wool prices continue their upward trend.

On the back of positive signs for many commodities, the NAB Rural Commodities Index rose 2.3 per cent in April to now be 0.5 per cent higher than the same time last year.

NAB agribusiness economist Phin Ziebell said commodity prices remained strong despite the Australian dollar being on the rise following a period of very low volatility.

“With commodity prices strong, especially iron ore, and risk sentiment increasing, the AUD has found increasing support,” Mr Ziebell said.

“Our forecasts point to the currency reaching 80 US cents by mid-year and 83 US cents at the end of 2021.”

Mr Ziebell said with winter planting now under way, the outlook for grain growers was generally positive.

“Prices continue to perform, with Australian grain remaining well-priced into South-East Asia,” he said.

“Concerns in key growing regions in Europe and the Americas continue to mount, suggesting potential price upside.

“Global shipping prices remain elevated, which has made Australian grain more competitive.

“While domestic wheat prices have eased somewhat in recent months, we expect some upside from here.

‘‘We see Australian wheat in the low $300/tonne range over coming months.

“Seasonal conditions, which were bolstered by big rainfall events earlier this year, remain generally good, however, some small caveats are emerging.

“April has been very dry in many areas and soil moisture levels have taken a hit from the lack of rain.

“This is unlikely to be a concern at this stage, given the rains earlier this year, but it does bear a close eye, particularly for producers in south-east Australia.

“There will be more reliance on in-season rainfall than we perhaps expected a month ago.”

Looking at natural fibres, the major consideration for growers remains water allocations.

“Water in storage across much of the Murray-Darling Basin has benefited from good rainfall,” Mr Ziebell said.

“The northern basin is now almost half full, while the southern basin has fallen after summer irrigating to 55 per cent.

‘‘These levels should be enough to see a bigger crop in the 2021-22 season compared to the 2020-21 season.

“Wool prices have continued their upward trend, particularly for finer wools, exceeding our expectations and delivering good news for wool producers.”

For beef producers, restocker interest remains the key driver of young cattle prices, boosted by March rainfall across many parts of Queensland.

However, NAB still forecasts the EYCI will fall in the second half of 2021.

While Global Dairy Trade auction results have been flat of late, overall, there has been strong growth since late last year, which is encouraging news for opening prices.

Looking at the horticulture sector, wholesale fruit and vegetable prices gained in April, up 7.6 per cent and 9.5 per cent respectively.

As has been the case since the COVID-19 pandemic began, labour availability will remain a challenge for the horticulture sector until normal travel returns.