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Agriculture Market Update

Australian and New Zealand farmers are continuing to benefit from the unusual occurrence of good growing conditions and higher commodity prices, supported by poor production in other parts of the world. The Agriculture Credit Fund invests in loans that are secured against agricultural assets across a range of market subsectors.

Below we detail some highlights from the last six weeks across our agriculture investment markets.

Dairy

In October, Fonterra Australia and Saputo Dairy announced step-ups to their average farmgate milk prices for the 2021/22 season to $7.10/kgMS and $7.05/kgMS, respectively. The step-ups were driven by subdued growth in supply and strong domestic demand. Year to date Australian dairy production is 3.3% behind 2020/21 production.

Horticulture

Strong growing conditions have led to a large supply of fruit and vegetable in the domestic market. The fall in fruit prices was led by falls in berries, citrus, and avocados due to plentiful supply. This sector is more influenced by domestic consumption and as such bigger crops weigh more quickly on farm gate pricing.

Meat & Livestock

Australian cattle prices maintained their record levels in October. For the past two months, the Eastern Young Cattle Indicator (EYCI) remained above 1,000c/kg. This is more than double where the EYCI was at the start of 2020. Australian lamb prices declined in October following record highs in August and September. The Eastern States Trade Lamb Indicator was 842c/kg on 9 November 2021, having revived marginally from October levels.

Cropping

ABARES has forecast Australian winter crop production in 2021/22 to be well above average. Australian grain prices continue to be supported by tight global supplies. Recent heavy rain across the eastern seaboard is expected to slow harvest and decrease quality leading to larger premiums for milling wheat and malt barley. Australian APW wheat is trading at $375/mt delivered port.

Agriculture Infrastructure

Significant interest in expanding the dairy processing capacity and capabilities in Australia and New Zealand continues to be observed. The adoption of new technology to create high-value dairy products, such as formulated nutritional products, is a key factor in this trend.

Weather

November to January rainfall is likely to be above median for much of the eastern two-thirds of Australia, extending into eastern parts of WA. La Niña thresholds are likely to be reached in November and maintained until at least January 2022. This may be increasing the chances of above-average rainfall for much of eastern and northern Australia.

Source: ABARES, Rural Bank, BOM, ABS, Rabobank

Image Credit: Claire Dyason & Harmony Agriculture & Food Company

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