According to the NAB February Rural Commodities Wrap, decreased beef cattle prices and grain prices are the key variables that cause the Index to soften.

Phin Ziebell, a senior agribusiness economist at NAB, foresees slightly lower grain prices and continued volatility in cattle prices this year, despite stabilising (cotton) or rising prices for other essential commodities (sugar).

“Australian wheat prices have been relatively stable since the big spring falls stabilised in December. Australian wheat futures are currently trading in the high-300s range. We see prices gradually easing this year, partly due to our higher Australian Dollar (AUD) forecast,” Mr Ziebell said.

“We still see an appreciating AUD this year, forecasting it to reach US 74 cents by the end of June and US 78 cents by the end of 2023.

“Australian cattle prices continue to track sharply lower, reflecting ongoing high turnoff, constrained processor capacity and a challenging US market. These risks – particularly around elevated domestic cattle supply – are unlikely to abate in 2023, and we see prices continuing to fall.”

There are different commodities that are noteworthy as well. For instance, at the beginning of the new year, cotton prices stabilised.

After solid growth in 2022, sugar prices are predicted to experience moderate gains in the following year.

“Water storage levels remain excellent, although planting was challenging with a cold, wet spring. Even if 2023 is dry, the season should deliver a reasonable crop,” Mr Ziebell said.

“Fertiliser has now been steadily declining from extraordinary levels in 2022. Our fertiliser index dropped 16.5% month-on-month in January and is now 13.5% below year-ago levels. While this is undoubtedly good news for producers, it is hard to see a return to early-2020 levels any time soon,” he added.

“Our feed grain price index has now retreated substantially from its mid-2022 highs, falling to $293/tonne in January, down 2.9% month-on-month but still nearly 10% above year-ago levels.

“While partial data for February suggests something of an increase, a big and quality downgraded winter crop and our expectations of a higher AUD should keep a lid on prices for the coming months.”

The outlook for the world economy is slightly lagging. In 2023, we predict that global growth will be below trend as China continues its disruptive shift following the loosening of COVID-19 limitations. Lastly, the rising inflation is still obstinately persistent.