NAB agricultural commodity index rises 2.6 per cent, cotton and wool prices rise

Wool and cotton growers have seen prices jump in the past month, with all other commodities also making gains in a positive start to the year for agriculture.

Cotton prices have jumped 6 per cent during February in a sign that spending on clothes has turned the corner.

FIBRE commodities wool and cotton have jumped in price during the past month in a sign consumers are spending more on clothes as they return to offices after coronavirus lockdowns.

In its latest Rural Commodities Wrap, National Australia Bank is reporting an 8.8 per cent rise in wool prices and a 6 per cent lift in cotton prices during the past month.

Along with sugar — which rose 6.1 per cent — the fibre commodities were the biggest movers in rural prices during February.

But all rural commodities appeared to make gains in prices during the month, following on from healthy rise during January.

NAB’s rural commodity index rose 2.6 per cent in February and is now 1.8 per cent higher than at the same time last year.

Dairy prices rose 5 per cent during February, lamb 1.7 per cent, beef 0.5 per cent and wheat 0.2 per cent.

NAB agribusiness economist Phin Ziebell said prices for wool and cotton had been increasing for six months.

“While the rising Australian dollar will blunt this somewhat, this is encouraging news for fibre producers,” Mr Ziebell said.

The bank said that, while there were still concerns recession, lockdowns and potential ongoing work from home would affect fibres, signs have emerged clothing spending was improving somewhat.

“Internationally, extensive US government stimulus should put upward pressure on consumer spending, as should the rollout of vaccines,” the bank said.

Mr Ziebell said grain prices had a modest rise during February but the outlook remained positive.

“While the Australian dollar’s appreciation has cut into local prices to some extent, Australian grain is now well priced in key southeast Asian export markets due to a steep rise in global shipping costs — a stark reversal from just two seasons ago,” he said.

“Global shipping prices have shot up in response to the COVID-19 pandemic, which has made Black Sea grain more expensive.

“This suggests that Australia’s big 2020-21 crop will largely be moved at good prices.

“We see Australian wheat in the low $300/tonne range over coming months.”

Also working in grain growers’ favour is the build-up in subsoil moisture in Western Australia, NSW and parts of Victoria and South Australia after good summer rain.

The Bureau of Meteorology’s latest outlook is for the La Nina weather pattern to fade over autumn and a return to more neutral conditions during winter.

Queensland remains the only state which missed out on summer rains, although the past week’s falls have renewed optimism among local farmers.

On the flip side, NAB is forecasting higher fertiliser prices and the Australian dollar reaching 83 cents by the end of the year.

Mr Ziebell said restocker interest remained the key driver of domestic cattle markets, with the Eastern Young Cattle Indicator around the 860c/kg mark, not far below record levels.

“With the Queensland wet season having disappointed in many areas, southern regions are in the driver’s seat,” he said.

“If restocker activity slows due to drier weather or a reassessment of future prices, there are some real downside risks.

“Lamb prices have eased a little recently, but remain at very juicy levels for producers.

“That said, we see lamb values as essentially maxed out at 2020s peak.

“While there may be some seasonal upside coming into late autumn, this is unlikely to be held into spring unless restocking continues.”

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