NAB pre­dicts EYCI to sit mid-400c/kg to low 500c/kg

North East & Goulburn Murray Farmer - - NEWS -

FOL­LOW­ING a large monthly gain of 6.5 per cent in Septem­ber, the NAB Ru­ral Com­modi­ties In­dex has con­tin­ued to per­form well month-on-month, ris­ing a fur­ther 1.8 per cent in Oc­to­ber.

Re­leased last month, the lat­est in­dex shows sugar and bar­ley were key driv­ers of the in­crease, which was off­set by weak­en­ing lamb and wool prices.

NAB agribusi­ness econ­o­mist, Phin Ziebell, said sugar had en­joyed a 24.1 per cent price rise in Oc­to­ber, while pro­longed drought con­di­tions - and as­so­ci­ated do­mes­tic feed de­mand - had led to an 11.7 per cent rise in bar­ley prices.

“Do­mes­tic feed prices are still ex­tremely el­e­vated com­pared to his­toric norms and global bench­marks,” Mr Ziebell said.

grain avail­abil­ity amid drought con­di­tions, and be­low av­er­age 2018-19 win­ter crops.

“Some re­cent rain caused grain price in­di­ca­tors to soften slightly, but things are far from nor­mal.”

The NAB feed grain price in­dex is up 7.2 per cent month on month, and 76.6 per cent year on year in Oc­to­ber.

Lamb prices fell nine per cent over the pe­riod, in what was the big­gest monthly fall across all com­modi­ties in the per cent softer.

“Lamb prices have been on a roller­coaster re­cently,” Mr Ziebell said.

“The Na­tional Trade Lamb In­dex peaked at an ex­tra­or­di­nary 875c/kg in early Septem­ber, be­fore fall­ing to 671c/kg in early Oc­to­ber, ris­ing to 783c/kg in late Oc­to­ber.

“De­spite this, lamb prices re­main very good for pro­duc­ers on the whole.”

In con­trast, the de­mand for wool has soft­ened, and this saw the East­ern Mar­ket In­di­ca­tor drop back to 1776c/kg early in No­vem­ber.

De­spite dry con­di­tions in much of the coun­try, the East­ern Young Cat­tle In­di­ca­tor ( EYCI) re­mained re­silient.

“The on­go­ing re­silience of the EYCI is largely a re­sult of cat­tle, as op­posed to any re­stocker de­mand, which is likely to be con­strained by a dry weather out­look and high feed costs,” Mr Ziebell said.

“Whether or not this de­mand is sus­tain­able re­mains to be seen, and we will be watch­ing US do­mes­tic mar­ket de­vel­op­ments closely.

“Over the com­ing months, we an­tic­i­pate that the EYCI will sit in the mid-400c/kg to low 500c/kg level.”

On a state-by-state ba­sis, Queens­land was the best per­former in Oc­to­ber, fol­lowed closely by West­ern Aus­tralia.

“Our in­dex showed that most re­gions gained on a monthly ba­sis in Oc­to­ber, although lower lamb and dairy prices did have an im­pact on Vic­to­ria, South Aus­tralia, Tas­ma­nia and west­ern New South Wales.

“Global dairy trade auc­tions con­tinue to dis­ap­point, and while the lower AUD has any ma­jor im­prove­ments in the short term.”

Win­ter crops in the east­ern states have had a very tough sea­son, with Oc­to­ber rain com­ing too late to many of the most drought af­fected re­gions.

“De­spite a some­what mixed spring, WA re­mains on track for an above av­er­age sea­son,” Mr Ziebell said.

“How­ever, down­grades in NSW and QLD saw the wheat pro­duc­tion fore­cast fall from 17.4 to 16.9 mil­lion tonnes.”

Cot­ton prices re­main strong, de­spite hav­ing fallen slightly this month.

Crop pro­duc­tion is ex­pected to be a key chal­lenge, due to a sharp re­duc­tion in avail­able ir­ri­gation wa­ter and tough dry­land grow­ing con­di­tions.

“The Bureau of Me­te­o­rol­ogy’s out­look shows a 70 per cent chance of El Nino this year, and the dry three­month out­look is con­cern­ing given that wa­ter stor­age lev­els are al­ready low,” Mr Ziebell said.

“Mur­ray Dar­ling Basin stor­age lev­els have now dropped be­low 50 per cent, which is the low­est spring amount since 2015.

“If al­lo­ca­tions are af­fected, then tem­po­rary prices will be high in com­ing months and grow­ing con­di­tions could be­come in­creas­ingly chal­leng­ing.”

The AUD was trad­ing slightly higher to­ward the end of Oc­to­ber, and is fore­cast to trade be­tween the USD 0.71 – 0.75 be­tween now and the third quar­ter of 2019.

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