RAIN is boosting the outlook for cattle and cropping in eastern Australia, according to NAB’s Rural Commodities Wrap, but increasing international supply competition is likely to moderate gains.
NAB said recent falls, coupled with the Bureau of Meteorology’s forecast for a wetter than average winter weather cycle, including a rising chance of a La Nina event, had boosted restocker demand and boosted cattle prices, and driven its best-case wheat crop forecast up 1 million tonnes to 27.1mt.
Currency
A falling Australian Dollar ($AU) had pushed most agricultural commodity prices higher in May.
While the prices of major agricultural commodities remain mixed on global markets, NAB said it expected a “downward drift” in the $AU, to sit in the high $US0.60 range by 2017, would continue to support Australian prices.
Brexit
Direct effects to Australia from Britain’s vote to leave the European Union are likely be minimal, NAB said.
Impacts would flow through trade relationships, which are relatively small between the UK and Australia.
Cattle
Rising US supply, driven by the end of drought outside the west coast, coupled with South American producers increasing access to international markets could impact Australian cattle prices in 2017, NAB said.
Low export prices threaten to lower saleyard prices into next year, but restocker demand is expected to keep prices high in the coming months.
Wheat
NAB doesn’t expect wheat prices to rise substantially in $US given strong global production forecasts and noted the United States Department of Agriculture continues to forecast strong global supply.
But NAB’s “high case” production estimate, based on 20 per cent above average winter rainfall, predicts a national harvest of 27.1mt.
Wool
NAB forecast that currently strong wool prices will increase 7.2pc in 2016-17. The higher prices are forecast to offset lower production in 2015-16 and spur an increase in production in 2016-17. The value of wool exports are expected to rise 6.9pc in 2015-16 and 8.9pc 2016-17.
Dairy
NAB does not expect a substantial increase in Chinese demand in 2017 and forecast international prices to remain low for the foreseeable future.
Victoria’s dairy crisis, which could see some producers earning as little as $4.31/kg milk solids, was driven by a range of factors including pressure from lower Chinese milk powder demand, the removal of European dairy quotas, the Russian dairy embargo and solid US domestic supply.
However, the low prices may see lower European supply which coupled with the lower $AU, should boost Australian export prices in $AU terms.
Lamb
Lamb and mutton production is forecast to fall 7.5pc in 2015-16 and 6.1pc in 2016-17.
Production and exports have been elevated to unsustainable levels during recent dry conditions in the past two years, driving export value down 1.4pc in 2015-16 and a further 7.2pc in 2016-17.
Pork
Australian wholesale pork prices fell again in May, down 1.1pc to 383c/kg after a sustained upward trend since mid-2015 had come under.
Fertiliser
Global fertiliser prices continue to trend lower. The NAB Fertiliser Index fell 0.6pc in $AU in May on lower urea prices. But a lower $AU could see prices rise into 2017.