Australia Agribusiness August 2022: Recession Fears Add Price Pressure
Here are the main highlights for some of Australia’s key commodities this month. The full report provides an overview of the developments to watch in the upcoming weeks.
- Grains & Oilseeds: We expect significant volatility in the coming weeks as the market digests the likelihood of a sustained deal for exporting grain out of the Black Sea.
- Dairy: Oceania commodity prices continued to trend lower in July. Growing uneasiness around dairy demand in many economies is leading to subdued import demand. Australian dairy farmers still enjoy the comfort of locked-in record milk prices.
- Beef: Falling cattle prices will squeeze grow-out margins. We expect cattle prices still have some room to fall, but the warmer spring months should support pasture growth and stabilise the market.
- Sheepmeat: Lamb prices dropped earlier than expected despite ongoing strong consumer markets. Processor capacity may be influencing prices, which we expect to continue downwards but at a less aggressive rate.
- Cotton: Enduring concerns about cotton consumption growth, plus at least the third-largest Brazilian crop on record coming to market in coming months means we continue to expect flat-to-declining global pricing in 2022/23.
- Wool: Rising interest rates, inflation, and the slowing economy will weigh on wool prices in the coming months, limiting the price upside from the recovery in US woollen suit imports seen in the latest May figures.
- Downstream Markets: Australian food inflation increased sequentially in the June quarter. Headline food inflation remains above decade highs. The latest retail trade data shows resilience in retail and foodservice sales for now.
- Farm Inputs: A squeeze on China’s export program as well as further squeezes on the EU’s fertiliser supply chain means we expect the lull in global urea prices is over, and too soon to translate to local price relief.
- FX/Interest Rates: The RBA raised interest rates 50 basis points to 1.85% and more will follow this year, driving the cash rate likely above 3%. The AUD will remain volatile. We expect a recovery to 0.74/USD on a 12-month horizon.
- Oil/Freight: July was another volatile month for crude oil prices, as they balance tight supply and recession fears. Container shipping prices continue to fall slowly and are expected to normalise further over the next 12 months.
