Summer rain, lamb eaters and exports revive farm price index

NAB's Rural Commodities Index rose for the third month in a row in January, underpinned by higher cattle and lamb prices as they recovered on the back of improving seasonal conditions.

The uptick in cattle values represented a 60 per cent improvement from their October lows, while trade lamb values at the end of January were averaging 70pc above their September low.

Dairy prices have also gained ground, helping fuel the NAB index's rise to levels last seen in May 2023 - up 2.2pc since December to about 150 points, based on movements since 2010.

The dairy market has risen about 40pc since August.

Even sugar prices remain historically high, despite plunging about 80pc over summer.

However, fertiliser prices ticked up month-on-month in January, as prices of natural gas and urea moved upwards.

NAB Group's economics associate director, Lea Jurkovic, said supply chain risks in the Red Sea could also mean some near-term upside risk for fertiliser prices.

She said cattle prices rose on the back of above-average rainfall at the end of 2023 and into 2024, which resulted in good pasture growth and buoyed producer confidence.

She said in general January proved to be the ninth-wettest on record.

"Exports were also strong in January and this demand combined with improved seasonal conditions should continue to support prices" Ms Jurkovic said.

Strong lamb exports complemented by improved domestic consumer demand for lamb on the barbecue in January, supported saleyard values.

Trade lamb values had risen nearly 25pc in January over their December prices.

"Lamb supply will likely come under pressure in the coming months, which will also buoy prices," she said.

However, subdued demand from our biggest buyer, China, was weighing on wool prices, which continued to track largely sideways, although the January market was up a little in January on monthly average terms.

Dairy prices rose an average 7pc over January, now up about 30pc since November.

Prices were rising for all dairy products. Production was expected to improve in 2024 after last year's 30-year Australian milk production low, which triggered the rise in farmgate prices."

Ms Jurkovic said in contrast, winter crop prices fell, weighed on by high global supply and weak demand.

"Wheat prices have continued to ease and in January at $370 a tonne on average were now back to their May 2023 levels," she said.

Canola prices dipped slightly during January and barley continued to ease in monthly average terms, driven by a soft decline in the feed barley price, while malt values stayed relatively stable.

Cotton prices were still elevated by historical standards, but globally demand was weakening and would likely weigh on prices, which were back on their November levels, but a little better than December.

NAB has warned that Australian economic growth was expected to be "below trend", weighed down by continuing inflationary costs and interest rate pressures on household consumption

It is not tipping any dip in the Reserve Bank of Australia's benchmark 4.35pc interest rate until November.