Australia Agribusiness May 2022: Inflation spiral & rate hike

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.


A Record-breaking Month: April was a month of records. While strong and partly record-breaking pricing (CBOT corn and CBOT soy oil) benefit farmers, the record fertiliser prices seen in early April and strong energy prices cut into margins. Globally, inflation in many regions has reached its highest point in decades and passing on costs to consumers is getting difficult. 

- Grains & Oilseeds: The war in Ukraine, dryness in South America, delayed planting in North America, and the continuation of La Niña will keep G&O prices elevated and volatile in coming months. Our 12-month outlook remains supportive.

- Dairy: Milk prices are rising in all Australia production regions ahead of the 2022/23 season. The milk supply situation in export regions continues to underwhelm, but with subtle signs of recovery. Weaker demand appeared globally.

- Beef: Timely rains in Queensland may be just enough for cattle prices to level out for a couple of weeks before tending lower again. Labour availability challenges in processing plants are a bottleneck for the slowly growing cattle supply.

- Sheepmeat: A separation of markets is on the cards as favourable seasons support sheep and restocker prices, but softer US import prices may see export lamb prices ease slightly.

- Cotton: A mid-year correction lower in pricing is still on the cards. From AU cash prices in the AUD 900s/bale in April-May, we expect pricing in the AUD 700s/bale range in Q3 2022.  

- Wool: Chinese lockdowns, expectations of rapidly rising interest rates in western economies, and the highest inflation levels in decades are expected to weigh on consumer spending moving forward.

- Downstream Markets: Consumers need to brace for more food inflation as headline numbers hit decade highs. In Australia it reached 6.7% with the largest contributor being fruit and vegetables. The potential consumer response and volume reduction in food and beverage sales could be more pronounced in emerging markets.

- Farm Inputs: Global urea prices have fallen but we do not expect a sustained, or further, decline unless hostilities cease in Ukraine, something that is considered unlikely in coming months. 

- FX/Interest Rates: RBA increased cash rate to 0.35% from historic low of 0.1%. More rate hikes expected through 2022. AUD weakened significantly against USD and we hold our forecast or AUD to regain some strength.

- Oil/Freight: Oil markets remain tight as the west moves away from Russian supplies, with limited room for supply disruptions. Seasonal higher demand is expected and any relaxations of China’s lockdowns could further support prices. Port congestions, especially in Asia, put upside risk on container freight rates.

  • 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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  • 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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