This article is from the Australian Property Journal archive
WET conditions persisted across much of Australia over the last month, driving a bright outlook for many commodities but also created some challenging disruptions, according to Rural Bank.
Dairy has been the “sector to watch” this month, with record-high opening farm gate milk prices announced for the 2022/23 season, coming in at more than 20% above closing prices for 2021/22.
“Firm global demand and a lack of production growth both domestically and internationally is supporting high prices,” the bank said.
“Increased production and strong export demand remain key themes across most commodities in the past. Prospects of further production growth is likely as a wet winter continues to unfold in most regions.”
Cattle prices steadily increased during the last month and remain well above this time last year, with slaughter improving in May and helping drive a 30% rise in export volumes.
“An increase in supply is likely to put downward pressure on values. However, this is set to be counter-balanced by firm restocker demand fuelled by ongoing wet conditions and a favourable rainfall outlook. This will keep prices steady and well above average levels for the coming month.”
The cattle industry is hoping to weather the foot and mouth disease (FMD) risk emerging out of Indonesia. The Australian Bureau of Agricultural and Resource Economics estimates that an outbreak of FMD in Australia could cause $80 billion damage to the meat and wool trade, but Australia’s biosecurity has kept FMD out of the country since the last outbreak in 1872 – exactly 150 years ago.
The wool sector saw the Eastern Market Indicator increase further in the last month and reach its highest levels since February. Annual wool production is set to reach its largest volume in four years, likely go beyond the 321,000 tonnes forecast by the end of the financial year.
Global inflation is becoming a growing risk to consumer demand for retail goods.
Lamb prices in eastern Australia have been volatile but have started to slowly trend upwards while mutton prices strengthened considerably. They are expected to take direction from supply in the coming month before rising later in winter. Slaughter levels improved from the lows of April, translating into improved export volumes in May.
Winter crop sowing is nearing completion with wheat production estimated at above 30 million tonnes. News Russia may allow grain exports out of Ukraine ports has softened global prices. Australian prices remain discounted to international values due to supply chain constraints and positive production prospects. Strong export demand for wheat is underpinned by demand in from China, and wheat exports to China to the end of April were at a record high 3.78 million tonnes.
Grain prices will also experience volatility in line with international markets.
Meanwhile, heavy rainfall and flooding throughout key fruit and vegetable growing regions in Queensland and NSW over the last few months are beginning to be felt by customers at the cash register. The supply gap left by crops wiped out in floods will see prices remain elevated for lettuce, potatoes, beetroot, broccoli, beans, tomatoes, and capsicums in particular.
Citrus harvest is in full swing with strong production forecast, but fruit is on the smaller side, while avocado prices remained constrained by a strong supply – to the point that growers are dumping lower quality fruit rather than transporting it for processing.
Wet weather has also impacted almond production.