Australia Agribusiness September 2023: Welcome Spring – Send Us Some Rain
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 decline. Drying conditions and the return of China for Australian barley have supported local prices. Whether Australia becomes drier or improves will determine whether local wheat can continue to trade at a premium to global benchmarks.
- Dairy: There were further falls in commodity prices in August. Weakness in the dairy complex has set in for now and patience is required for the Chinese market to rebalance. On a positive note, milk supply growth across key export regions is losing steam as milk prices fall and weather risk lingers.
- Beef: Drier seasonal conditions have seen cattle prices drift lower, particularly for younger restocking cattle. With the forecast for drier conditions ahead and ongoing soft consumer demand in local and global markets, we believe cattle prices may drift down a little further in the coming month.
- Sheepmeat: Dry conditions and very high slaughter numbers continue to cause subdued pricing for lamb and mutton. Ongoing high lamb slaughter, with last season lambs and new season lambs starting to converge, does not suggest much upside for lamb prices.
- Cotton: Dry conditions, which have led to a falling crop estimate in the US, are supporting the recent price push. While supply factors are driving the market, the continued subdued global demand picture is restricting how high they can climb.
- Wool: Continued weak demand is underpinning the current price direction, which softened toward the end of August. A resurgence in key retail markets will be key in the coming months to boost Chinese manufacturing activity and subsequently local export demand.
- Consumer Foods: Improved supply is bringing prices down. Led by deflation in fruit and vegetables, food price inflation this month was reported at 5.6% YOY – down from last month’s 7%.
- Farm Inputs: Fertiliser references had an upward correction in August, but this is likely to be short-lived. There is no strong competition for cargo as Northern Hemisphere players are focussing on harvest. This upside is a sign that global oversupply is coming to an end and that supply and demand should rebalance in a few months’ time.
- Interest Rates and FX: Local economic data continues to surprise on the softer side and the currency has been under substantial pressure in August. The likelihood that the RBA has finished hiking rates has increased, but we are still maintaining our forecast for one more 25bp increase at the November meeting.
- Energy and Freight: Crude oil prices continue to lift as economic resilience in the US and signs of extended production cuts from OPEC further exacerbate the supply/demand imbalance in markets. Diesel prices continue to rise relative to crude oil.
