Higher grain prices and more favourable global dairy auctions pushed the NAB Rural Commodities Index 1.5 per cent higher in May 2017, with cotton, wool, and fruit and vegetables also performing well.
NAB Agribusiness Economist, Phin Ziebell, said NAB’s weighted dairy export indicator gained 9.1 per cent in May 2017 – the best performance since December 2016.
“This is largely due to improved demand from China and earlier flooding in New Zealand, but it’s important to note farm gate prices have not risen to the same extent,” Mr Ziebell said.
“The slow recovery in farm gate prices isn’t supporting an increase in production levels, so opening prices over June 2017 will be watched closely.”
The latest global data suggests wheat prices may have turned a corner after bottoming out in the second half of 2016, though the uplift has so far been small.
“Domestically, old season crop has held its value better than we had expected with mice perhaps a bigger issue than prices in coming months.”
Wholesale fruit and vegetable prices were up again in May 2017, with fruit prices surging 11.9 per cent and vegetables up a more modest 2.0 per cent.
Tomatoes have been an especially strong performer, up 21 per cent in May 2017.
Fibre prices have continued their steady rise, with wool’s Eastern Market Indicator up 1.6 per cent and cotton prices up 3.2 per cent.
Mr Ziebell said red meat prices were down slightly in May 2017, but beef, lamb and mutton prices continue to track well above their historic averages.
“Far more worrying is the decline in wholesale pork prices, down another 4.3 per cent in May 2017 and now 20 per cent lower than May 2016.
“This represents a significant drop for an industry that’s traditionally been quite stable.”
The Bureau of Meteorology’s three month climate outlook for winter remains much drier than average for the south but wetter than average for the top end.
NAB expects the AUD will trade down towards 0.70 cents by the end of 2017, and that the Reserve Bank will maintain the cash rate at 1.5 per cent for an extended period.