After hitting a record high in February, the National Australia Bank's Rural Commodities Index jumped another 5.8 per cent in March, energised by better seasonal conditions, the devalued dollar and solid domestic demand for farm sector produce.
NAB agribusiness economist Phin Ziebell said the coronavirus's depreciating pressure on the Australian dollar was turning into a major positive for farmers and exporters as it boosted prices in local currency terms, although producers faced slightly higher input prices.
At the start of the year NAB's national rural commodities monitor, based on an index rating which began in 2010, sat at 140 points.
By last month it had zoomed above 160 and even hit 180 in NSW.
After a 2019 best forgotten, 2020 is shaping up very well
NAB has tipped the dollar, currently worth about US61 cents after slipping to US57c in mid March, would stay under US63 this year because of global economic pressures triggered by the coronavirus pandemic.
Apart from the low dollar's export friendly advantages, NAB's latest Rural Commodities Wrap outlined two other major positives for agriculture amid the COVID-19 confusion - a vast improvement in the seasonal outlook and high domestic demand for staples like meat and flour.
"After a 2019 best forgotten, 2020 is shaping up very well," Mr Ziebell said.
"The Reserve Bank of Australia has now cut the cash rate to 0.25 per cent, and unconventional monetary policy is being used to keep the three-year government bond yield at around 0.25pc.
"The COVID-19 crisis means considerable uncertainty remains for the global economic outlook, but NAB forecasts point to an AUD around the USD 0.63 mark by the end of 2020."
While Australia's high value, premium product food exports, particularly meat, could lose some market momentum as global consumers faced greater economic insecurity and unemployment concerns, and restaurants stayed closed, Mr Ziebell said, on balance, domestic livestock restocker demand should provide a timely counterbalance, pulling prices away from global fundamentals.
"Domestic demand for staples is high, and while most hoarding is likely to be transient, there is a move from some grain exporters to secure more domestic supplies," he said.
"Root zone moisture is well above average in southern Queensland, most of NSW and Victoria and Tasmania, and the three-month outlook points to well above average rainfall across most of the country.
In the livestock sector, the competing forces of strong restocker interest and challenging global market fundamentals would place different pressures on beef and lamb prices in coming months.
Grain's looking good
Grain continued trading above international benchmarks, although the gap is closing due to higher global prices and the lower dollar.
"Two months ago, we would have expected prices to fall back in line with global fundamentals," Mr Ziebell said.
"It now looks like the opposite has happened with global fundamentals supporting local prices amidst consumer stockpiling and the spectre of export restrictions in some markets.
"The combination of a good season and good prices is the holy grail for grain growers and comes as welcome relief after two very tough seasons for most of eastern Australia."
While fertiliser prices fell substantially last year, bank analysts now suggested 2020 could be a roller-coaster, complicated by the benefits of lower global energy prices, but possible supply issues.
A low dollar would also intensify import costs for fertiliser and fuel.
COVID-19 meant demand for fibres like cotton and wool were likely to slip and prices had already started to fall.
"Wool prices have dropped significantly, which is a trend we expect to continue due to likely lower demand fundamentals for the remainder of 2020," Mr Ziebell said.
"We don't expect cotton's downward trend to be reversed while the current global economic turmoil continues."
While horticulture was enjoying mostly solid local demand, it also faced potentially bigger risks than other agriculture sectors because of a serious labour availability shortfall.
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