Even though the value of the Australian currency was lower than the expectations, the favourable seasonal conditions have anchored the agricultural outcomes. In fact, The NAB Rural Commodities Index has now increased by 9.6 per cent, when compared to the rates in 2020. The increase from May to June is approximately 0.8 per cent. Moreover, due to the resurgence of the Covid 19 virus, the U.S. currency has continued to retain its appreciation. This is the reason why the value of the Australian dollar remains the same. This is of course favourable for the horticultural world because the lower currency rate has increased the price of local commodities.
However, with the AUD currency losses being so driven by USD strength, the cross rates may not see the same improvement. Beyond being a major health and community challenge, the economic consequences of the COVID-19 Delta variant for agriculture will be labour and equipment issues with state border closures as well as lower foodservice demand, particularly in Sydney. Despite the ongoing COVID-19 challenges, commodity prices continued to rise, with cattle the standout performer.
While the currency rate and prices have clearly exceeded our forecasts, we are more concerned than ever that domestic prices – which are driven almost entirely by restocker interest – are unsustainable. Importantly, they do not reflect trends in global markets and will be a challenge for processors. However, for those who have been able to hold stock through the drought, it is a matter of joy.
Currently, seasonal conditions were close to perfect for the winter crop, with the main problem being waterlogging more than anything else. The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) June crop report points to 27.8 million tonnes of wheat this season, but it is highly likely that there will be further upward revisions. Global price and currency sentiment remain strong, reflecting strong demand and supply challenges in a number of growing regions. Domestic wheat futures have dropped a little recently, with Australian grain now very well priced into South-East Asia.