Australian agriculture set for strong year

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DESPITE the challenges of 2020, Australian agriculture is in its strongest position in years with the NAB Rural Commodities Index rising 4.2% in January to now be 7.3% higher than the same time last year.

The latest NAB Rural Commodities Wrap says the prices of most commodities and improving seasonal conditions in many areas are expected to foster good returns for producers throughout the year.

NAB’s agri-food economist Phin Ziebell said while 2021 is expected to be another strong year for many, the appreciation of the Australian dollar (AUD) and volatile livestock prices will put some downward pressure on them. on the index towards the end of the year.

“Underpinning our 2021 forecast is the AUD forecast track, which shows the AUD climbing to $ 0.80 by the middle of the year and to $ 0.83 by the end of the year. of 2021, “Ziebell said.

“This currency appreciation is likely to put some pressure on rural commodity values, with livestock prices likely being one of the main drivers of this outcome.

“The Eastern Young Cattle (EYCI) indicator is now approaching 900 c / kg. While it is possible that prices will continue to rise if the Queensland rains occur, local prices are now out of step with global fundamentals, especially in light of an appreciating AUD.

“It is only normal for Australian prices to lag global benchmarks during periods of herd rebuilding, however, if demand eases there is a risk of substantial downside. Overall, we expect sales prices to decline somewhat in the second half of the year. “

Chinese trade barriers were a hallmark of 2020 and their maintenance, escalation or de-escalation is a key issue for Australian farmers in 2021.

“With a huge crop to move and China imposing an 80% tariff, Australian barley farmers have been fortunate to benefit from strong purchasing activity in Saudi Arabia. Although it is only feed barley, the global rise in grain prices has allowed producers to take advantage of reasonable prices, ”said Ziebell.

“We find that world grain prices remain high, but largely offset by a higher AUD and the demise of the base. This all adds up to a forecast for Australian wheat in the low end of $ 300 / tonne, a respectable price, especially given the good to excellent yields from the recent harvest. “

The NAB fertilizer index rose 8.8% in January and the feed grain price index shows signs of recovery in 2021 after a downward trend in 2020.

Lamb prices got out of sync with their usual seasonal patterns last year, rising instead of falling during the spring hunt. The new year brought further gains, with lamb prices marketed above the levels of the previous year, however, spring hunting price declines are expected to return this year after an absence in 2020.

Wool prices recovered somewhat from their lows in September of last year, with the recovery more pronounced for wools finer, 20 microns and below.

Global dairy trade auction results have risen in USD in the last six consecutive auctions, and NAB’s dairy exports price indicator rose 4.9% in AUD terms in January.

Prices for fruits and vegetables were mixed in the wholesale market data. Fruit prices rose 6.6% while vegetables fell 3% in January. The lack of available labor to harvest crops continues to be a major concern for the industry.

Click here to download the NAB Rural Commodities Wrap (PDF)


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