Australia agribusiness June 2024: Rain brings some relief
Here are the main highlights for some of Australia’s key commodities and economic influences for this month. The full report provides an overview of the developments to watch in the upcoming weeks.
Wheat and barley: Fundamentals in the global wheat markets changed from oversupply to potential tightness, which saw a robust rally of double-digit growth MOM on the back of Black Sea dryness and late frost. Australian prices also grew, though at a smaller rate because of the previous seasons’ carryover.
Canola: The European decision to impose duties on Russia’s and Belarus’ oilseeds imports might tighten meal and oil availability in the EU and could become a key price-supporting element. Globally the stock-to-use ratio of canola is expected to slide as bad weather takes tons away from the global inventory.
Dairy: Minimum milk prices for the 2024/25 season have been announced and are broadly in line with Rabobank’s expectations. Lower milk prices are on the cards for southern production regions, which will likely mean that there is margin pressure needing to be budgeted for leading into the new season.
Beef: Prices continue to track sideways with many cattle categories now surpassing cattle prices from a year ago. Drier conditions in southern Australia heading into winter may cause some prices to ease a little in the coming months.
Sheepmeat: Finished lamb (trade and heavy lamb) prices are seeing a gradual trend upwards which is in line with a more traditional trend. We think this should continue as lamb volumes decline but dry conditions in southern Australia may see restocking, merino and mutton prices slip over the coming months.
Cotton: ICE #2 Cotton futures collapsed to 18-month lows as funds quickly exited their massive net long position over the course of April in anticipation of a strong global 2024/25 supply outlook and sluggish demand.
Wool: Wool prices expected to remain steady but EOFY and the winter recess may cause some small fluctuations in the market over the coming months.
Consumer foods: The Australian food market is still facing some headwinds. The latest monthly data showed food inflation remains sticky, while combined turnover in food retail and foodservice continues to show signs of softness by historical comparison.
Farm inputs: Farm input markets remain quiet as demand is soft and supply outputs are steady. On the other hand, high freight prices are negatively impacting further farmgate price reduction.
Interest rates and FX: The Federal budget and various state budgets last month included big new spending commitments that add to aggregate demand while reducing measured CPI. Much will depend on how the RBA chooses to respond in June. Rabobank forecasts two more rate hikes in August and November and no cuts in 2024 and 2025.
Energy and freight: Brent crude oil as well as Australian diesel prices eased and Rabobank forecasts some more price pressure for brent crude oil. Container freight jumped >50% in May to a new 2024 high due to congestions in major global ports, which will likely make imported goods into Australia more expensive.
