2021-06-03
Australia Agribusiness June 2021: Approaching the new season with a full head of steam Featured
The Commodity Index rose 0.8% in May, driven by gains in the price of grains and oilseeds. The index remained strong due to low global stocks and dryness in the Northern Hemisphere. Local wheat prices struggled to follow global markets, but winter crop planting in Australia is expected to grow 2% this year, with canola hectares seeing the biggest increase. Overall, Australia is on track for another above-average production year in beef, dairy, and grains.
In the dairy sector, global spot markets remained stagnant in May, with Oceania origin commodity prices mostly flat. However, a price correction is expected in the later stages of 2021 due to an anticipated softening of Chinese import demand. Supply growth across major export regions has been limited, with positive growth in South America but tempered by rising feed costs and inflation. Australian milk production has expanded slightly, and healthy profit margins are expected for dairy farmers in the upcoming season.
Cattle prices continued to trade strongly in April, supported by limited numbers of finished cattle and strong restocker demand. Slaughter numbers and beef exports were down compared to the previous year, with the exception of increased volumes to South Korea and the Middle East. Argentina's temporary suspension of beef exports may cause some disruption but is not expected to have a significant impact on global markets. As for grains, global urea prices are expected to ease in the southern winter, but local prices may be influenced by local demand and supply. Ocean freight prices remain at record highs, impacting product costs at the farmgate. The Australian dollar is projected to trade close to its current level against the USD, supported by a strong economy.