AUSTRALIA’s wheat production is expected to be the smallest in a decade, forecast to be down almost 47 per cent on last year’s record crop at only 18.7 million tonnes.
NAB Agribusiness economist Phin Ziebell said weather has been a major driver of local prices and production levels, and that was likely to continue.
“To put it bluntly, the weather has been wildly varied this year,” Mr Ziebell said.
“One of the biggest drops in wheat production will come from NSW, which has suffered from very low rainfall, frosts and heatwaves in the space of a single season.
“Meanwhile Western Australia and, more recently, South East Queensland, have seen soaking rains.
“There’s already been a partial recovery in cattle prices because of the rain in Queensland, but much of the country remains very dry and pasture availability ahead of summer is by no means guaranteed, so slaughter levels are expected to remain elevated.”
Feed grain prices rose 4.4pc to $228/t in September, as a sharply lower grain harvest became more of a reality.
Domestic grain is trading at a large premium amid a lack of supply, although this is likely to abate for export grain, which will need to meet the world market.
The weather outlook for the remainder of the year and into next is somewhat more positive, with the Bureau of Meteorology forecasting average to above average rainfall for most of the country for the rest of the year.
Despite stronger domestic wheat prices, lower cattle and horticultural prices have helped to push the NAB Rural Commodities Index down 2.2pc in September.
For other commodities, Mr Ziebell said it had been a mixed bag.
“Lamb prices have displayed incredible resilience in the face of dry seasonal conditions and the usual spring flush, with the National Trade Lamb Indicator just over 600c - slightly higher than the same time last year.
“Fruit and vegetable prices showed characteristic volatility in September, but both ended lower overall – 15.8pc and 7pc respectively. On average, they are cheaper at a wholesale level than at the beginning of the decade.
“Our Australian pork price indicator was up 1pc in September – the first monthly rise since December 2016. However, pork prices are off 25pc year on year.
“The wool market has retreated slightly but remains buoyant overall, prompting ABARES to forecast an increase of 3.4pc in production in 2017-18, arresting (at least temporarily) a long decline.”
NAB is predicting downward pressure on the Australian dollar, falling to US75c at the end of this year and spending most of next year at the US73c mark.
On interest rates, Mr Ziebell said the easing cycle has come to an end, but there would be no move upward until 0.25pc increases in August and November 2018.