F&V price rises prop up NAB index

F&V price rises prop up NAB commodities index

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The NAB says fruit and vegetable prices increased over February 2019.

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STRONG fruit and vegetable prices have helped drive up the National Australian Bank Rural Commodities Index for February.

The index experienced a modest 0.2 per cent increase. 

The latest NAB Rural Commodities Wrap shows a 16.4pc and 22.9pc increase in fruit and vegetable prices respectively over the period, with seasonal conditions behind much of the increase.

"Monthly moves in horticultural prices often reflect seasonal patterns more than anything else and this is likely to have been the case in February," the report said. 

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NAB Agribusiness Economist, Phin Ziebell, said that while dairy auction prices had also contributed to the index gain, high overheads were continuing to pose problems for dairy farmers.

"Auction prices have tracked higher since the most recent farm-gate step ups, but the biggest concern for the industry remains high input costs, particularly grain and water for irrigated dairy operations," Mr Ziebell said.

"Grain prices have eased slightly from their very high levels at the end of 2018, from the mid-$400/tonne range to the high-$300/tonne range.

"However, they remain well above global benchmarks and we don't see that changing without good autumn rain."

The need for a solid autumn break is reflected in the performance of several other commodities, with cattle prices falling to lows not seen since late 2014 before rallying slightly on the back of rain on Queensland's Darling Downs.

"The Eastern Young Cattle Indicator (EYCI) dropped to 385c/kg in early March, but has since returned to above 440c/kg. More autumn rain would see elevated restocker demand, and we see the EYCI sitting around 425c/kg in Q2 2019, before recovering to around 500c/kg by Q1 2020," Mr Ziebell said.

NAB Agribusiness Economist, Phin Ziebell.

NAB Agribusiness Economist, Phin Ziebell.

"It's a similar story for lamb prices, which have come under recent pressure from seasonal conditions, despite the overall trend remaining positive and supported by a strong wool market."

Soil moisture for winter crop planting remains well below average in many areas, and any late break would prove challenging for the winter crop outlook.

"The current Bureau of Meteorology three month outlook points to a relatively neutral season, despite parts of Queensland, New South Wales and Victoria having a lower chance of exceeding median rainfall," he said.

"Autumn rainfall is notoriously difficult to predict and the risk of a late autumn break will cause heightened concern around winter crop yields.

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