Australia agribusiness September 2024: A hot spring brings opportunities and risks
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.
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Wheat and barley: Little has changed for global wheat and feed grains in recent months. The plentiful North American corn and wheat harvest is on track, and challenges for EU and Black Sea wheat do not appear strong enough to alter the outlook for sufficient ending stocks.
Canola: Climatic problems across Europe and the Black Sea are tightening canola and sunflower supplies and might support canola import demand from the EU. Trade tensions between Canada and China could lead Canada searching for alternative options to market its GM canola crop.
Dairy: There were signs of life in dairy commodity markets in August. However, the global fundamentals remain evenly balanced, and more upside is required to push up farmgate prices. The key focus is on New Zealand milk supply as the season ramps up and the ongoing rebalancing of milk supply in China.
Beef: Cattle prices continue to slowly track upward with processor cow prices the first category to break above the five-year average. High female slaughter numbers are creating questions about whether the herd is in liquidation. We don’t think this is the case. Instead, we believe the slaughter numbers reflect higher numbers of cattle in the system.
Sheepmeat: A dramatic drop in lamb slaughter volumes through August helped rebalance the supply-demand equation. We believe this will support prices at current levels. The question remains whether the total lamb drop will be lower this season or just delayed.
Cotton: Global cotton prices found support in August, with the ICE #2 Cotton contract rising modestly. The primary driver for recent price action is weather issues in Texas. However, global demand headwinds will likely limit major upside going forward.
Wool: Wool prices declined in August as demand headwinds pushed prices lower. Australian export data disappointed amid a notable decline in Chinese shipments.
Consumer foods: The latest ABS retail trade data for July showed a slowdown in total food expenditure. The consumer food market remains very dynamic with consumers increasingly on the hunt for value while tightening the belt on total food expenditure.
Farm inputs: Month-on-month price movements were modest across fertilisers as uncertainty regarding global demand kept prices trading range-bound. On the supply side, China remains absent from the export market and natural gas prices remain volatile.
Interest rates and FX: Unemployment ticked higher in August and the monthly inflation series suggested some moderation. Nevertheless, the RBA signaled a 2024 rate cut is not on the cards and the Aussie dollar rallied in response.
Energy and freight: Oil prices continued to moderate in August and could slide further in September as demand shows signs of easing. Seasonal demand patterns are expected to place upward pressure on freight rates in the near-term before increased container supply provides longer term relief.
