The lower Australian dollar that has supported strong agricultural exports should remain at similar levels through 2016 and well into 2017, NAB Agribusiness predicts.
The long term prediction comes amid a rally in the Australian dollar to 74 US cents, its highest level for eight months, on the back of the release last week of surprisingly positive Australian economic growth data.
However, taking a view across the remainder of the year, NAB Agribusiness believes the $A will reach a low of 67 US cents at the year’s end before trending slowly upward over 2017.
NAB Agri’s view is that beef prices will ease on average by 1.7pc next financial year.
“We have downgraded our forecasts for the value of beef exports amid slowing export volumes and a disconnect between domestic saleyard and US export prices as domestic restocking becomes the dominant driver of saleyard prices in 2016,” the report says.
“The US beef market has been volatile, reflected in lower 90cl beef prices even in AUD terms since late last year.
“US producers continue to rebuild their herds following the drought.
“Nonetheless, we still expect domestic prices to remain at or near record levels in the coming months as producers look to rebuild herds.
“Beyond 2016, higher exports from Brazil and Argentina are likely to increase competition in the US market.”
NAB believes the value of Australian beef exports will be 3.7pc higher for the 2015-16 financial year but will fall 10.4pc in 2016-17.
Despite the global economic risks, NAB is expecting the Reserve Bank to keep the cash rate on hold throughout 2016, with further recovery expected across the Australian non-mining economy.
Source: NAB. To view the full report visit nab.com.au/agriview