The NAB Rural Commodities Index rose 2.1 per cent in October 2017, the first increase since May 2017, driven largely by an increase in cattle prices.
NAB Agribusiness Economist Phin Ziebell said that latest report shows that the Index was also pushed up by lamb, and fruit and vegetables, while domestic grain prices fell.
“Cattle prices roared back to life after good rains in Queensland and New South Wales after months of abnormally dry conditions,” Mr Ziebell said.
“After almost reaching the key 500c mark at the end of September 2017, the Eastern Young Cattle Indicator is now over 575c/kg and still rising.
“However, even if seasonal conditions remain strong, key export markets remain a challenge as Australian prices remain detached from US fundamentals in many ways.
“Lamb prices continue to display incredible resilience in the face of the usual spring flush, with the MLA National Trade Lamb Indicator well over 600 cents and is substantially higher than the same time in 2016.”
The wool market is almost back to record breaking highs, rising in October 2017 after a decline in September 2017. The spike in coarser wools looks to have abated, but fine and super fine wool remains at a substantial premium.
Mr Ziebell said the wheat forecast remains at 18.7 million tonnes, as October 2017 rainfall in New South Wales was arguably too late to boost yields.
“Domestic grain prices fell in October 2017, while feed prices rose 2.4 per cent.
“Some of the pressure on prices due to the current shortage of feed grain in the domestic market is likely to be alleviated, after rains across New South Wales and Queensland boosted planting conditions for sorghum and expectations for pasture growth.
“Nonetheless, domestic grain is likely to remain at a premium for the rest of 2017.”
Prices for most coarse grains have fallen back recently, especially sorghum. Rice looks to be relegated to second place in the NSW Riverina this season in favour of more profitable (and generally less water intensive) cotton.
While the Australian dollar remains higher than most agricultural producers would like, recent pressure has been downward, and NAB sees the currency falling to 75 US cents at the end of 2017 and spending most of 2018 at the 73 US cent mark.
Interest rate forecasts remain unchanged, with NAB predicting the next movement to be up, in both August and November 2018, with two further hikes anticipated for 2019.