THE National Australia Bank (NAB) Rural Commodities Index rose for the second consecutive month in March with prices up 3 per cent, largely reflecting favourable cotton, cattle, grain and horticultural prices.

Phin Ziebell

The latest NAB Rural Commodities Wrap shows that on a state basis, cattle-heavy Queensland was the best performer, up 4.1pc.

NAB Agribusiness economist Phin Ziebell said cattle prices jumped following good rains across much of the state, but restocker interest hadn’t kept them there.

“The Eastern Young Cattle Indicator is now around 538c/kg, and by the end of the year we still see a fall to around the 500c range as likely,” Mr 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 Index for wheat prices was up 2.4pc 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.

“Barley prices are trading close to ASW levels due to the feed demand, which is a bonus for those with barley in storage.

“Looking ahead to the 2018-19 winter cropping season, the lack of subsoil moisture across major grain-growing districts of New South Wales, South Australia, Victoria and increasingly Western Australia leaves a lot of heavy lifting to be done by in-season rainfall.”

Mr Ziebell said the Australian dollar (AUD) remained higher than many producers would like.

“We have maintained our forecast that the dollar may move down to around 75 US cents. For 2019 we see the AUD as hovering around the mid-70s,” he said.

“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.

“Looking at interest rates, going forward the RBA is likely to be very cautious and we have however maintained our view that two additional rate rises are likely in 2019.”

Source: NAB