Lower cattle and horticultural prices have helped to push the NAB Rural Commodities Index down 2.2 per cent in September, despite stronger domestic wheat prices.
The latest report includes another cut to NAB’s wheat production forecast, to 18.7million tonnes.
This would be the smallest harvest in a decade, and down almost 47 per cent on last year’s record crop.
NAB Agribusiness economist Phin Ziebell said weather had been a major driver of local prices and production levels, and that was likely to continue.
‘‘To put it bluntly, the weather has been wildly varied this year,’’ Mr Ziebell said.
‘‘One of the biggest drops in wheat production will come from NSW, which has suffered from very low rainfall, frosts and heatwaves in the space of a single season.
‘‘Meanwhile, Western Australia and, more recently, south-east Queensland, have seen soaking rains.
‘‘There’s already been a partial recovery in cattle prices because of the rain in Queensland, but much of the country remains very dry and pasture availability ahead of summer is by no means guaranteed, so slaughter levels are expected to remain elevated.’’
The NAB report said feed grain prices rose 4.4 per cent to $228/tonne in September, as a sharply lower grain harvest became more of a reality.
It said domestic grain was trading at a large premium amid a lack of supply, although this was likely to abate for export grain, which will need to meet the world market.
The weather outlook for the remainder of the year and into next is somewhat more positive, with the Bureau of Meteorology forecasting average to above average rainfall for most of the country for the rest of the year.
For other commodities, Mr Ziebell said it was a mixed bag.
‘‘Lamb prices have displayed incredible resilience in the face of dry seasonal conditions and the usual spring flush, with the National Trade Lamb Indicator just over 600¢ — slightly higher than the same time last year.
‘‘Fruit and vegetable prices showed characteristic volatility in September, but both ended lower overall — 15.8 per cent and seven per cent respectively.
‘‘On average, they are cheaper at a wholesale level than at the beginning of the decade.
‘‘Our Australian pork price indicator was up one per cent in September — the first monthly rise since December 2016.
‘‘However, pork prices are off 25 per cent year-on-year.
‘‘The wool market has retreated slightly but remains buoyant overall, prompting ABARES to forecast an increase of 3.4 per cent in production in 2017-18, arresting (at least temporarily) a long decline.’’
NAB is predicting downward pressure on the Australian dollar, falling to US75¢ at the end of this year and spending most of next year at the US73¢ mark.
For interest rates, NAB believes the easing cycle has come to an end, but no move upward until 25 basis point increases in August and November 2018.