Higher wheat prices and improved dairy auction results were offset by poorer livestock prices and weakness in sugar and cotton to leave the NAB Rural Commodities Index unchanged in June.
The latest Rural Commodities Wrap from NAB Agribusiness reveals wheat prices rose 8.2 per cent in June amid concerns about conditions in the United States and Europe, while dairy export prices climbed 5.5 per cent.
NAB Agribusiness economist Phin Ziebell said local wheat prices had strengthened beyond international markets and bore close observation during the coming weeks.
‘‘Global wheat prices bottomed out in the second half of last year due to global oversupply but local prices have now increased more than 10 per cent over the last two months,’’ Mr Ziebell said.
‘‘This is due, in part, to dry weather in the United States as well as domestic concerns around the very dry start to winter.
‘‘NAB’s weighted dairy export price indicator had another solid gain in June after rising 9.1 per cent in May, but it’s important to emphasise this reflects dairy export prices, not farm gate opening prices.’’
Beef prices trended slightly downwards in June amid dry weather and mixed export market prices, and the Eastern Young Cattle Indicator is now lower than at the same time last year.
Sugar prices had another bad month, down 15 per cent in June as a result of stronger global supply and subdued crude oil denting ethanol prices.
Fibres also had a weaker month price-wise. The wool market continues to see some of the best conditions in decades, but the Eastern Market Indicator slipped 1.5 per cent in June, and cotton prices were down 5.8 per cent in AUD terms.
Mr Ziebell said the lack of rainfall across much of Australia was a major issue for producers at the moment and the Bureau of Meteorology’s three-month outlook for July to September showed below-average rainfall for much of southern Australia.
‘‘Cropping operations across much of the country desperately need rain and the dry conditions have seen cattle slaughter reach a 28-week high.
‘‘Dairy production could also come under pressure in the coming months if pasture growth is below average.’’
NAB believes the strength in the AUD is unlikely to survive any meaningful recovery in the US dollar, and maintains its prediction of 0.70 USD at the end of 2017.
The bank is also maintaining its forecast for no increases in official interest rates until mid-2019.