MORE favourable global dairy auctions and stronger grain prices pushed the NAB Rural Commodities Index 1.5 per cent higher in May.
NAB Agribusiness economist Phin Ziebell said NAB’s weighted dairy export indicator gained 9.1 per cent in May – the best performance since December 2016.
“This is largely due to improved demand from China and earlier flooding in New Zealand, but it’s important to note farm gate prices have not risen to the same extent,” Mr Ziebell said.
“The slow recovery in farm gate prices isn’t supporting an increase in production levels, so opening prices over the next month will be watched closely.”
The latest global data suggests wheat prices may have turned a corner after bottoming out in the second half of 2016, though the uplift has so far been small.
“Domestically, old season crop has held its value better than we had expected with mice perhaps a bigger issue than prices in coming months.”
Cotton, wool, and fruit and vegetables also performed well.
Wholesale fruit and vegetable prices were up again in May, with fruit prices surging 11.9pc and vegetables up a more modest 2pc. Tomatoes have been an especially strong performer, up 21pc in May.
Fibre prices have continued their steady rise, with wool’s AWEX eastern market indicator up 1.6pc and cotton prices up 3.2pc.
Mr Ziebell said red meat prices were down slightly, but beef, lamb and mutton prices continue to track well above their historic averages.
“Far more worrying is the decline in wholesale pork prices, down another 4.3pc in May and now 20pc lower than this time last year,” he said.
“This represents a significant drop for an industry that’s traditionally been quite stable.”
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The Bureau of Meteorology’s three month climate outlook for winter remains much drier than average for the south but wetter than average for the top end.
NAB expects the Australian dollar will trade down towards US70c by the end of the year, and that the Reserve Bank will maintain the cash rate at 1.5pc for an extended period.