Farm commodity prices buffered by currency falls

Beef Central, 20/04/2015

Australian farm commodity prices are being buffered by the falling Australian dollar to an extent not seen since 2008, with further interest rate cuts and falling terms of trade expected to continue pushing the exchange rate lower.

The National Australia Bank’s latest Agribusiness Rural Commodity Index for April shows an increasing gap between the US$ and A$ indices, since they intersected in September 2014.


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General manager of NAB agribusiness, Khan Horne, says the index in A$ terms is on the way up and for the US$, on the way down.

“NAB’s forecast is for the A$ to fall to US74c this year and 73c in early 2016,” Mr Horne said.

“If this occurs, the gap between the A$ and US$ indices will widen further over the coming months.”

“We expect another rate cut is most likely to occur in May, but if the economy continues to improve, the cut could be further delayed,” he said.

“A second cut to below 2 percent is something we see as a possibility of only 35-40pc – significantly below the market’s current view. NAB’s forecast is for rates to start to rise again by late 2016,” Mr Horne said.

The NAB Rural Commodities Index fell 1.7pc in March in A$ terms, led by lower beef, lamb, fruit, vegetable and sugar prices. In US$ terms, the index was down 3.3pc.

Cattle prices began to ease in February and continued to fall until late March. Overall, the Eastern Young Cattle Indicator fell 4.6pc (A$) month-on-month to A424.7c/kg.

“While prices remain much higher than the same time last year, generally below average rainfall across major Queensland beef regions in March has tempered restocker enthusiasm,” Mr Horne said.

Across other commodities, prices for wheat, wool sugar and cotton are expected to fall in 2014-15 compared with last year.


  • NAB’s Rural Commodities Index includes 28 commodities (beef, lamb, pork, poultry, dairy, wheat, barley, sorghum, rice, oats, canola, chick peas, field peas, lupins, wool, cotton, sugar, wine grapes, apples, bananas, oranges, mangoes, strawberries, broccoli, carrots, lettuce, potatoes and tomatoes). The index is weighted annually according to the gross value of production of each industry in Australia.




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