Australian Agricultural Sector: A Mixed Bag in July 2024
The Rabobank Australia Agribusiness Monthly report for July 2024 presents a nuanced outlook for the Australian agricultural sector. While some commodities are showing promise, others are facing headwinds. The report highlights the potential impact of global events and trends on the Australian market, underscoring the need for farmers and agribusinesses to stay informed and adapt to changing conditions. The Australian agricultural sector faces a complex and dynamic environment. Farmers and agribusinesses must stay informed and adapt to changing conditions to remain profitable. While some commodities are performing well, others face challenges. By understanding these trends and global events, stakeholders can make informed decisions and navigate the ever-changing agricultural landscape.
Grains: Wheat and Canola Prices Drop
Wheat prices have plummeted due to better-than-expected yields in Russia, despite a global wheat supply deficit. Canola prices have also fallen due to increased rainfall in Canada and expectations of higher production. However, the global oilseed market remains tight, supporting prices in the coming months. The December 2024 CBOT Wheat contract decreased by 18.6% month-over-month, while the ASX January 2025 future dropped by 11%. The ASX basis has improved to AUD 18/tonne from AUD -10/tonne. While Canola contracts fell by 7% to AUD 649/tonne, and MATIF dropped by 2% to AUD 755/tonne. Canadian farmers are expected to plant 8.9 million hectares of canola, a 2.8% increase from the previous forecast.
Livestock: Cattle and Sheepmeat Prices
Cattle prices have remained stable despite high slaughter numbers, with the US market showing signs of strength. Sheepmeat prices continue to rise, suggesting lamb supplies may be contracting, leading to further price increases. Wool prices remain flat, with little change expected in the near term.
The Eastern Young Cattle Indicator (EYCI) is at 581 AUc/kg cwt. Year-to-date slaughter numbers are 15% higher than last year. Australian beef exports increased in June, with volumes to Japan and South Korea exceeding the five-year average. While, Trade and heavy lamb prices finished June at AUc 742/kg and AUc 735/kg, respectively. Weekly lamb slaughter numbers decreased by 2% in June, while sheep slaughter was down 16% month-over-month but remains 16% higher year-to-date.
Dairy: Record-High Butter Prices
Global dairy markets are experiencing record-high butter prices due to tight supply and demand fundamentals. This could lead to higher consumer prices in Australia. The Oceania spot butter price reached a record high in June, surpassing USD 7,000/tonne FOB. Spot prices for other dairy commodities were flat to slightly higher.
Cotton: Futures Fall to 18-Month Lows
Cotton futures have dropped to 18-month lows due to a strong global supply outlook and sluggish demand.ICE #2 Cotton futures dropped to 18-month lows. The USDA increased its projection for 2024/25 world-ending stocks to 83.5 million bales.
Global Events and Trends
The Danish government's plan to introduce an agricultural emissions tax from 2030 may signal a shift in policy action aimed at reducing agricultural emissions globally. The Australian dollar is expected to appreciate against the US dollar in the second half of 2024, while global containerised freight rates continue to rise due to port congestion and capacity constraints.
Additional Points to Consider
The agrochemical industry is dealing with high inventory levels, which could put downward pressure on farmgate prices. Food inflation in Australia has moderated in May, but risks remain for certain categories, such as dairy and eggs.