ABARES March update summarised the short term outlook for major Australian agricultural commodities, where we saw the demand and value for red meat and dairy products forecasted to drop along with the wheat, wine, barley and chickpea prices.
We’ve seen these impacts flow through with red meat in particular being impacted by reduced food service demand in the current environment, but has been supported by the retail sector during lockdowns. Export demand has been impacted, however Australia is not alone in COVID-19 complicating its processing and export supply chains with our key competitors including the likes of South America, New Zealand and India also suffering from the disruption.
Expanding on the comment above, the grains market remains fairly stable with the World Wheat Indicator marginally up in the short term (USD $220 to $225/mt in 2021), but falling over the medium term as production is still projected to outpace growing demand supported by population growth, changing diets and rising incomes. With barley pricing under pressure following the Chinese Government’s recent announcement of the 80 percent tariff, traders will be looking to markets including India and the Middle East to place the excess tonnage and support prices. WA will face the brunt of the impact given it provides the majority of Australia’s exports to China.
A few key commodities have experienced falls in line with the on-set of COVID-19, including the likes of wool which suffered four weeks of successive losses before settling towards the end of May (AWEX EMI 1,179). Sugar slipped to near $350/mt before returning to ~$370, with production in Brazil remaining high but concerns growing over the impact of COVID-19 on milling capacity as the country nears its apex of cases.
In the wake of a COVID-19 induced slump in consumption (12 percent), cotton prices have been impacted, albeit buffered by the continued low AUD and greater volumes on the back of recent east coast rain to provide pricing of back above break-even (over $500/bale) following years of drought.