The NAB Rural Commodities Index has continued its upwards momentum, increasing 1.4 percent month-on-month in May, driven by rising prices for wheat, barley, canola and lamb.
The Index is now around levels last seen in February 2023, according to NAB’s June Rural Commodities Wrap released today.
NAB Group Economics Associate Director Lea Jurkovic said wheat was again the key driver of the Index’s climb.
“Wheat prices rose a little over 10pc in the month, as prices rallied on the back of poor seasonal conditions in Europe which weighed on global supply,” Ms Jurkovic said.
“Canola and feed barley prices also increased in May, rising 7.1pc and around 7.8pc in monthly average terms respectively.
“Trade lamb prices increased nearly 3pc month-on-month in May in monthly average terms. Prices rose despite high supply on the back of strong domestic demand.
“Cattle prices were little changed in May, rising nearly 1% again in monthly average terms. Despite elevated slaughter rates and increased supply, export demand helped support prices.”
Ms Jurkovic said seasonal conditions were mixed across most of the country in May, with national rainfall 34.9pc below the long-term national average in the month but above average in New South Wales and Western Australia.
“The Bureau of Meteorology announced a La Nina watch in May, which means there is a roughly 50pc chance of a La Nina event developing later in the year,” Ms Jurkovic said.
As was widely expected, the RBA left the cash rate unchanged at 4.35pc at its June meeting.
“NAB continues to expect that the RBA will remain on hold in the near-term, with the question being how long rates will need to remain at their current restrictive level to see inflation back into the target range,” Ms Jurkovic said.
“We are still pencilling in a first rate cut in November, but the exact timing is heavily data dependent.
“We continue to see the AUD appreciating against the USD in the second half of 2024 and into 2025. The currency is expected to rise to around US69c by the end of this year.
“The outlook depends on a broader softening in the USD as the US economy slows and the US Federal Reserve begins to ease monetary policy.”
Source: NAB. The NAB Rural Commodities Index is based on the price and production data for 28 commodities and is weighted by their relative size in Australia’s agricultural sector.
