NAB Rural Commodities Wrap: November 2022

Australian agricultural commodity costs have posted a slight uptick within the final two months, as measured by NAB’s Rural Commodities Index.


Whereas the weaker world financial outlook has materially dented demand for a lot of non-energy bulk commodities, agriculture continues to see typically elevated costs as patrons weigh seasonal and geopolitical uncertainty.

Our index was up 1.0% in September and an additional 1.1% in October, following a pointy 8.0% drop in July and an additional 1.7% fall in August. A lot of the current improve has been pushed by greater wheat and cattle costs, offsetting falls in cotton, fruit and greens.

Seasonal situations have been typically very supportive this 12 months, with an enormous winter crop simply across the nook. Nevertheless, floods throughout components of jap Australia (notably Victoria, Tasmania and Southern New South Wales) have destroyed beforehand good crops for some growers. Extra moist climate is forecast throughout jap Australia coming into summer time, more and more the danger of additional crop high quality downgrades. In the meantime, the third La Nina in a row rolls on, though the occasion is prone to break down early in 2023.

Whereas costs and yields proceed to outperform, enter prices and market volatility stay a problem. Volatility is prone to persist and even perhaps improve in 2023.

We proceed to see a speedy normalisation (i.e. improve) in world and home financial coverage. The Federal reserve has now hiked by 75 foundation factors for the final 4 conferences in a row, whereas the RBA lately raised charges one other 25 foundation factors to 2.85%. This materially weakens the worldwide financial outlook for 2023. We count on the Fed Funds Price to peak at round 5% by March 2023, whereas our RBA observe sees the money fee topping out at 3.6%. The AUD stays uneven amid world financial uncertainty – we see the foreign money closing out the 12 months at round 65 US cents, with some upside within the new 12 months.

For additional particulars, see the NAB Rural Commodities Wrap Nov 22

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