The National Australia Bank Rural Commodities Index rose for the second consecutive month in March with prices up three per cent, largely reflecting favourable cattle and grain prices — but the forecast suggests global dairy prices will likely not increase.
The latest NAB Rural Commodities Wrap, released on April 16, shows that on a state basis, cattle-heavy Queensland was the best performer, up 4.1 per cent.
‘‘The Eastern Young Cattle Indicator is now around 538¢/kg, and by the end of the year we still see a fall to around the 500¢ range as likely,’’ NAB agribusiness economist Phin Ziebell said.
‘‘Our view is that global trends, combined with expensive domestic feed grain and dry conditions in many areas, will see downward pressure on Australian cattle prices this year, although not by a large amount.’’
The slightly lower Australian dollar cushioned weaker global dairy prices locally, with the NAB weighted dairy export price indicator up 2.1 per cent in March.
‘‘Prices have weakened in line with fading New Zealand weather concerns and ongoing strong supply from the Northern Hemisphere,’’ Mr Ziebell said.
‘‘Our forecasts do not point to much upside for global dairy prices in USD terms in the coming year, reflecting strong supply from the EU in particular, better weather conditions in NZ, cheap feed in the US and inventory overhang.
‘‘Any local gains are more likely to come from currency or competition between processors.’’
The index for wheat prices increased 2.4 per cent in March, and domestic wheat premiums remain.
‘‘Lot feeders will continue to need grain for some time to come, and after the disappointing summer crop, prices are likely to remain at a premium for now,’’ Mr Ziebell said.
‘‘Looking ahead to the 2018-19 winter cropping season, the lack of subsoil moisture across major grain-growing districts of NSW, South Australia, Victoria and increasingly Western Australia leaves a lot of heavy lifting to be done by in-season rainfall.’’
Mr Ziebell said the forecast Australian dollar could change if a trade war between China and the United States developed.
‘‘We have maintained our forecast that the dollar may move down to around 75 US cents.
‘‘Of course, this forecast does not include the outbreak of a real trade war between the USA and China, which would see a significantly lower AUD.
‘‘China has already put a tariff on over a hundred US agricultural products. While there’s potential upside in some Chinese markets, such as horticulture, wine, and feed grains, events are moving too fast to assess the full impact for agriculture at this stage.’’