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Cotton, lamb and wool drive up commodity prices: NAB

by Grain Central, 10 July 2018

THE National Australia Bank (NAB) Rural Commodities Index rose 1.4 per cent in June, driven largely by impressive wool, lamb and cotton prices.

Phin Ziebell

Released today, the latest NAB Rural Commodities Wrap shows that wool and sheep meat remain the star performers, although the Eastern Market Indicator dropped below 2000c/kg last week. Meanwhile trade lamb prices jumped 8 per cent in June.

NAB Agribusiness Economist, Phin Ziebell, said that while wool prices dropped last week, wool growers remained generally confident, helped by trade lambs continuing to bolster prices.

Cotton prices have continued trending higher, with the Cotlook A index averaging $652/bale in June.

Production is expected to be lower in 2018-19, with the latest ABARES forecast pointing to a 21pc fall due to lower water storage levels and reduced plantings.

Despite recent rain across parts of New South Wales, southern Queensland and the Western Australian wheatbelt bringing welcome relief for winter crops, the predicted persistence of tough seasonal conditions will likely see a continuation of lower cattle prices and reduced plantings in northern NSW and Queensland.

“Local seasonal conditions continue to have an impact on grain prices, which remain at a significant premium compared to international benchmarks. We expect these premiums to remain for some time, unless the season markedly improves,” he said.

“While dry conditions continue to impact cattle prices, which remain weak on the back of high female slaughter numbers, the Eastern Young Cattle Indicator (EYCI) has tipped back above 500c/kg after bottoming out at 465c/kg at the end of May, showing a resilience in the market that surpassed our expectations.

“Overall, persistent dry conditions continue to be the main force behind grain and cattle prices, with domestic grain premiums likely to remain and cattle prices likely to stay supressed.”

The Bureau of Meteorology’s latest three-month outlook forecasts only Tasmania and WA to receive average rainfall with much of NSW, northern Victoria, and parts of coastal Queensland rated at a less than 30pc chance of exceeding average rainfall.

The AUD has been volatile, and lower overall, however it is predicted to be back in the mid-70s range towards the end of 2018.

Source: NAB

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