Australia Agribusiness October 2023: Dry Times Ahead as El Niño Declared
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: Local grain prices have defied the global price declines through September. Drying conditions and the return of the Chinese market for Australian barley are supporting local prices. How much a drier season impacts the winter crop will determine how local prices perform against global benchmarks.
- Dairy: Milk supply growth across key export regions is set to remain weak over the remainder of 2023 and into 2024. This should help support dairy commodity prices – and runs the risk of a price whiplash should stronger-than-expected demand settings emerge.
- Beef: El Niño puts a further dent in producer sentiment and cattle prices drop further. With drier conditions on the horizon, we don’t expect any upside movement in cattle prices in the coming months, but there are more positive signs in the global market with US import prices rising.
- Sheepmeat: Huge volumes of lamb and high volumes of sheep continue to dominate the Australian sheepmeat market, causing prices to stay low. Seasonal conditions are adding to this, but there are some green shoots of improvement in consumer markets.
- Cotton: Markets have been reacting to downward revisions to global supply forecasts – with the exception of Brazil, where supply outlook is improving. Locally, the focus will be on the impact of a drier season on the Australian crop.
- Wool: A backdrop of bearish demand settings continues to influence wool markets. Wool prices across the range of microns were a mixed bag during September and are expected to remain range-bound in the near-term.
- Consumer Foods: Improved fresh produce supply is bringing reported food prices down. Led by deflation in fruit and vegetables, food price inflation this month was reported at 4.4% YOY – down from last month’s 5.6%.
- Farm Inputs: A new supply and demand balance for fertilisers and agrochemicals is emerging, indicating how the next season’s farm cost structure might look. The outlook is positive but energy prices and currency risks are poised to make things a bit blurry.
- Interest Rates and FX: The AUD remains under pressure and briefly dipped below USc 64 in September. The RBA kept rates on hold in October after softening retail turnover and job vacancy data showed a slowdown in the economy. However, a lift in inflation in August and rising crude oil prices are adding to concerns that the RBA may have to raise rates again. We expect a 25bp lift at the November meeting.
- Energy and Freight: Crude oil prices surged by almost 10% in September as production cuts and dwindling inventories further tightened markets. Diesel prices have risen even faster due to reduced refining capacity and an export ban instituted by Russia.
Where to go from here
Stefan VogelGeneral Manager – RaboResearch Australia & New Zealand Read more
Angus Gidley-BairdSenior Analyst – Animal Protein Read more
Michael HarveySenior Analyst – Dairy & Consumer Foods Read more
Emma HigginsSenior Analyst – Agriculture Read more
Pia PiggottAnalyst – Associate Analyst Read more
Vítor Caçula PistóiaAnalyst – Farm Inputs
Edward McGeochAssociate Analyst – Agri Commodities