Improved dairy auction results and strong fruit and vegetable prices drove a modest 0.2 per cent increase in the National Australian Bank Rural Commodities Index in February.
Released last week, the latest NAB Rural Commodities Wrap shows a 16.4 and 22.9per cent increase in fruit and vegetable prices respectively during the period, with seasonal conditions behind much of the increase.
NAB agribusiness economist Phin Ziebell said while dairy auction prices had also contributed to the gain, high overheads were continuing to pose problems for dairy farmers.
‘‘Auction prices have tracked higher since the most recent farm gate step-ups, but the biggest concern for the industry remains high input costs, particularly grain and water for irrigated dairy operations,’’ Mr Ziebell said.
‘‘Grain prices have eased slightly from their very high levels at the end of 2018, from the mid-$400/tonne range to the high-$300/tonne range.
‘‘However, they remain well above global benchmarks and we don’t see that changing without good autumn rain.’’
The need for a solid autumn break is reflected in the performance of several other commodities, with cattle prices falling to lows not seen since late 2014.
‘‘The Eastern Young Cattle Indicator (EYCI) dropped to 385¢/kg in early March, but has since returned to above 440¢/kg,’’ Mr Ziebell said.
‘‘More autumn rain would see elevated restocker demand, and we see the EYCI sitting around 425¢/kg in Q2 2019, before recovering to around 500¢/kg by Q1 2020.
‘‘It’s a similar story for lamb prices, which have come under recent pressure from seasonal conditions, despite the overall trend remaining positive and supported by a strong wool market.’’
Soil moisture for winter crop planting remains well below average in many areas, and any late break would prove challenging for the winter crop outlook.
‘‘The current Bureau of Meteorology three-month outlook points to a relatively neutral season, despite parts of Queensland, NSW and Victoria having a lower chance of exceeding median rainfall,’’ he said.
‘‘Autumn rainfall is notoriously difficult to predict and the risk of a late autumn break will cause heightened concern around winter crop yields.
‘‘Without rain, allocations are likely to remain under pressure in 2019-20 and could negatively impact production.’’
On a state-by-state basis, Victoria was among one of the only states to improve its performance in February, gaining 6.2 per cent, while NSW fell 1.5 per cent.