The NAB Rural Commodities Index increased by 0.4 per cent month-on-month in June, rising for the third consecutive month.

The index is now around levels seen in February 2023.

The small gain in the index was largely driven by the increase in the price of wheat. 

After rising nearly 11 per cent in May, the rally slowed in June which saw the price of wheat increase around 3.5 per cent month-on-month in monthly average terms.

The continuation of issues with global supply, particularly in the northern hemisphere, supported prices.

Lamb prices also rose notably in the month, up 8 per cent on May in monthly average terms, as elevated slaughter rates began to ease off.

Cattle prices slipped a little in the month, but the market remains supported by export demand.

Seasonal conditions were broadly supportive in June, with the BoM recording rainfall as 9.2 per cent above the 30-year average to 1990.

Looking forward, the BoM remains on La Nina watch and four of the seven climate models it surveys suggest that sea surface temperatures could reach La Nina levels by October.

A typical amount of rainfall is expected for most of Australia from August to October.

Some above-average rainfall is likely in south-west WA and inland NSW.

Above-average maximum and minimum temperatures are expected across most of Australia from August to October.

Fertiliser prices rose around 4.7 per cent month-on-month in June in monthly average terms.

The prices of urea, diammonium phosphate (DAP), and natural gas all rose over the month.

Fertiliser import prices are still well above pre-pandemic levels, though global fertiliser prices are expected to fall in 2024-25.

Feed grain prices slipped a little less than 1 per cent over the month in June in monthly average terms.

The tick down was driven by a slip in the price of feed wheat. Price for barley, oats, and sorghum all increased in the month.

In the Australian economy, we now expect the RBA’s first rate cut to take place in May 2025.

From there we see the RBA cutting rates by 125bps over the subsequent year or so.

While growth has slowed over the past year and the labour market has eased, progress on inflation has been slower than expected, seeing the RBA on hold for longer.

We see economic growth as having remained soft in Q2.

Our outlook for growth in the Australian economy is broadly unchanged.

Growth is expected to remain below trend this year but improve to trend over 2025 and 2026.

Pressure in the labour market continues to ease, though the unemployment rate remains low at 4 per cent.

We expect this to rise to around 4.5 per cent by the end of 2024, reflecting a cooling in labour demand amid still strong population growth.

Economic growth has slowed significantly over the past year as the effects of monetary policy have flowed through, but progress on inflation has been slower than we (and the RBA) had expected.

We continue to see the AUD appreciating against the USD in the second half of 2024 and into 2025, reaching US69c by the end of this year and US75c by the end of 2025.

A slowdown in the US economy, and rate cuts from the US Federal Reserve later this year, should support the appreciation.

Inflation in advanced economies has peaked and labour markets are starting to call.

Recognising that, alongside the fact that monetary policy is in restrictive territory, major advanced economy central banks have started easing rates or are expected to do so soon.

We continue to expect soft global growth of 3.0-3.1 per cent between 2024 and 2026.

Risks to the outlook include the extent of central bank easing, geo-political tensions, and further tightening of supply chains.