Australia Agribusiness April 2022: Input Cost Rises Eat Into Farming Margins

Here are the main highlights for some of Australia’s key commodities. The full report provides an overview of the developments to watch in the upcoming weeks.

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- Commodities: The war in Ukraine keeps prices of key commodities like grains, oilseeds, energy and fertilizers volatile. Exports from the region remain severely disrupted, heavily tightening global supplies, especially for import countries. 

- Grains & Oilseeds: War updates and tight stocks are expected to prolong the exaggerated volatility in G&O markets, with no near-term reprieve from historically high pricing. CBOT wheat fell below USD 10/bu, but can only stay there if Russian wheat finds its way to importers, and Ukrainian farmers don’t massively cut grain production, and are able to export.

- Dairy: Record milk price signals have already been released for the 2022/23 season. A global supply crunch continues to support commodity prices, which will support farmgate milk prices in the new season.

- Beef: Dry conditions in the north are forcing earlier cattle sales. This increase in numbers is expected to cause downward pressure on young cattle prices, and, as a result, we believe the EYCI will drift down. Finished cattle prices should remain more stable.

- Sheepmeat: Good seasonal conditions and strong export markets are expected to balance the increased lamb supply, and we expect prices to remain flat over coming months.

- Cotton: A moderate mid-year step down in cotton pricing is expected, while substantial demand concerns are weighing on our expectations for 2023.

- Wool: Increases in apparel sales – including US sporting apparel imports containing wool  – in key markets, provide favorable upside to wool prices. However, building economic uncertainty and constraints on consumer spending could still lead to downside price movement.

- Downstream Markets: February marked a milestone for Australia’s foodservice market. The Australian domestic market has opened up and there has been a normalization of consumer behavior.

- Farm Inputs: Unfortunately for local farmers, we think it is unlikely any significant price relief will be felt before the end this winter and spring. 

- FX: AUD has been the best-performing G10 currency given the war-driven commodity price hike and strong economic growth outlook. RBA interest rate hikes are getting more likely in 2022 as inflation is a key issue. 

- Oil: Oil prices close to USD 100/bbl keep Australian fuel prices expensive. Bulk freight rates have firmed since the beginning of the war and the slow decline of container freight rates has halted for now.

  • Stefan Vogel

    General Manager – RaboResearch Australia & New Zealand.
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  • Angus Gidley-Baird

    Senior Analyst – Animal Protein
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  • Michael Harvey

    Senior Analyst – Dairy & Consumer Foods
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  • Cheryl Kalisch Gordon

    Senior Commodities Analyst
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  • Wesley Lefroy

    Senior Analyst – Agriculture
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  • Emma Higgins

    Senior Analyst – Agriculture
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  • Genevieve Steven

    Analyst – Agriculture
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  • Dennis Voznesenski

    Analyst – Agriculture
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