The NAB Rural Commodities Index moved marginally higher in January, rising 0.4per cent month-on-month, underpinned by higher average prices for beef and a more modest increase in dairy prices in the month writes Gerard Burg.
NAB’s February Rural Commodities Wrap reports tighter global supply conditions continue to o er opportunities for Australian beef exporters, however the uncertainty around US tariffs could present some risk.
For dairy, tight global supply conditions are likely to persist in the short term, keeping product prices higher which could flow through to higher farmgate prices as well.
NAB senior economist Gerard Burg says NAB forecasts a slowing trend for the global economy during the next two years.
“The outlook is increasingly uncertain, particularly with respect to trade policy,” Gerard says.
“United States tariffs risk damaging trade wars that could see growth slow, and inflation rise,” he says.
“While Australia shouldn’t be a specific target for US trade measures, as we have a trade deficit with the US, we shouldn’t be overly complacent” US officials have already targeted individual industries –such as aluminium – and the rapid increase in Australian beef exports in the past two years could bring this sector under their attention.
“In addition, there may be across-the-board tari measures of all countries.
“In the near term, inflation among major advanced economies remains relatively elevated, with little progress in bringing core inflation, excluding volatile items like food and energy, lower since April 2024.
“We see Australian economic growth picking up in 2025, driven by improving consumer spending, with gradually easing inflation and policy rate cuts set to provide a boost.”
US tariff announcements, and expectations of more to come, have strengthened the US dollar (USD) and directly impacted the Australian dollar (AUD). This has had the the positive impact of improving the competitiveness of Australian agricultural exports in global markets.
On the negative side, the decline in the AUD has also increased the costs of fertilisers for Australian producers –and most new farm machinery costs.
“NAB forecasts a strengthening in the AUD in the second half of 2025 – up to around US67c at the end of 2025 and US73c at the end of 2026 – with this reflecting anticipated softening in the USD from the second half of 2025 onwards,” Gerard says.
Looking at crop prices, wheat prices have essentially tracked sideways since late September – around the $330/tonne mark.
“Strong domestic production could add some downward pressure, albeit global markets appear to remain tight,” he says.
“Similarly, malt barley prices remained broadly stable over the same period, having eased considerably from the heights of the first half of 2024.
“In contrast, canola prices moved higher, pushing close to$800/tonne in early February.”
The Bureau of Meteorology's forecasts for February through April see above average rainfall for the period across most of the country – particularly in the north – while parts of southern WA and the south east are likely to see rainfall within the typical range.
