Global growth concerns and a hit to many commodity prices in July were offset by signs that input costs are stabilising and seasonal conditions for agriculture remain generally positive.
NAB’s July Rural Commodities Index dropped 6.9 per cent in July, from an all-time record high in June.
NAB senior agribusiness economist Phin Ziebell said many commodities had been hit hard by rising fears of an economic downturn, as central banks rapidly normalised interest rates in response to high inflation.
“This has spilled over into agricultural commodities, with wheat prices dropping to below Ukraine invasion levels. However, grain supply uncertainty remains, and prices could move higher in response to geopolitical or seasonal risks,” Mr Ziebell said.
“In better news, input prices, which have presented a major challenge to agricultural producers, have eased somewhat over the last month, even though from very high levels.”
Fuel prices have decreased in response to cheaper global oil, and fertiliser saw another monthly drop, although NAB warned its fertiliser index was still up almost 60 per cent compared to the same time in 2021.
“While seasonal conditions have been mostly supportive — southern frosts and northern floods notwithstanding — higher input and transport costs, rising interest rates, an uncertain global growth outlook and COVID-induced staff shortages at processors have all contributed to weaker cattle demand. That said, prices remain very high by historic Australian and current international standards,” Mr Ziebell said.
“Lamb prices continue to ease, albeit gradually compared to cattle markets. This is in line with our view that the decade-long price run-up has now peaked.”
Wholesale data suggests that fruit and vegetable prices have peaked, at least for the time being.
Wholesale fruit prices were up 1.7 per cent in July following a fall of 2.9 per cent in June while vegetable prices fell 9.5 per cent in July after an extraordinary 38.4 per cent jump in June.