NAB agribusiness economist Phin Ziebell said rising farm input prices would continue to present a challenge this year, although solid commodity prices had offset the impact for many producers to date.
“Rising oil and gas prices continue to affect farm inputs, notably fertiliser,” Mr Ziebell said.
“While US dollar (USD) denominated DAP (di-ammonium phosphate) and urea prices eased a little in January, they are up 273 per cent and 311 per cent respectively since the beginning of the pandemic in January 2020.
“This is clearly a global challenge and could have broader implications for crop production and profitability in 2022.”
Mr Ziebell said looking at commodity prices, the outlooks for wheat and cotton were particularly positive.
“High global fertiliser prices, geopolitical uncertainty in Ukraine and patchy global growing conditions have kept wheat elevated — a trend likely to continue in the first half of 2022.
“The cotton price rally continues, with Australian dollar (AUD) denominated Cotlook closing in on $1000/bale, the best result in 11 years. Seasonal conditions are excellent, reflecting replenished storages and good dryland performance.
“Canola has now pulled pack substantially from its earlier rally, which had seen prices close to the $1000/tonne range. It seems unlikely at this stage that we will see a similar peak in 2022.
“Barley prices remain fairly low compared to other winter crops, reflecting the hangover from the China trade ban and plentiful domestic supply.”
Mr Ziebell said while the Eastern Young Cattle Indicator remained at near record levels above 1100¢/kg, driven by strong seasonal conditions and herd rebuilding, prices were not sustainable in the long-term.
“Processor demand has been strong, although domestic prices are now so detached from global fundamentals that export viability could be an increasing issue.
“The wet summer has prolonged the peak, but we see the EYCI breaking the 1000¢/kg level on the way down around mid-year, with further falls in the back half of 2022.
“Lamb has now eased post-spring flush, hovering in the 850¢/kg range since November, but prices around these levels still represent excellent returns for growers.
“Wool prices have been mixed to slightly higher recently, with the AWEX Eastern Market Indicator at 1407¢/kg last week.
“All three global dairy trade auctions this year have been positive, the latter two especially.
“Our export price index is now well above any time in the last decade, representing very good news for producers.”
