Weather
Heavy rain again across the Northern Territory and Queensland, but amounts not as devastating as the previous week, mostly in the range of 50-100mm with isolated heavier falls. Good soaking rain also hit the border regions of New South Wales from Goodooga, east to the coast. Apart from the devastation caused and huge cleanup ahead for western Queensland, there will be flooding through NSW for weeks to come, as slowing moving flood waters move south. Livestock movements will be disrupted, but marshes and watercourses will be replenished setting these areas up for a wonderful season. It has started to rain in Western Australia with a front catching agricultural areas across southern parts of the state, reaching into the central and south-eastern wheatbelt. The falls were moderate but it’s a start. Not much rain in forecast but the eastern wheatbelt of WA looks to get some more.
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Australian Dollar
After a mundane trading since December at around 63USc, the $A reached a recent high of 63.9USc after Trumps tariffs were initially deemed as best case for Australia. On Friday, after China announced 34 per cent (pc) reciprocal tariffs on all US imported goods starting 10 April, the $A broke to 61.1USc as market sentiment quickly turned to risk-off. Equities, oil and copper were all thumped. In the washup, the $A was down over 3 pc for the day - its worst single day performance in two years. Expect further volatility as markets adjust to Trump’s new tariff regime and country after country announce their response. At the time of writing, the $A had a quick trip below 60USc but has just crept back to 60.1USc and looking very unconvincing.
Trump tarriffs
Last week, on 2 April, Donald Trump disrupted a global trading system that had been in place for over 75 years by introducing a new baseline 10 pc US tariff on goods from all economies. Higher tariff rates were imposed on some economies, based on Trump’s expert analysis of tariffs charged against the US, which they say includes considerations for size of the current trade deficit, currency manipulation and non-tariff trade barriers. The list shown on the chart below is not exhaustive and doesn’t include countries with small deficits or surplus’ which were generally charged at 10pc depending on what they were charging the US. Australia was charged 10 pc despite having a trade surplus with US and virtually charging them no tariffs and only imposing restrictions on US products based on science assessed biosecurity risks.
The real fun starts this week with China already saying they will charge 34pc reciprocal tariffs on all US imported goods starting 10 April, taking effective rates for US goods (lots of agricultural goods) imported into China over 50 pc. As previously, Australian feed grains have already seen the benefits of increased trade into China due to tariffs imposed on US corn and sorghum. The beef trade is the big watch now. Prior to tariffs and the non-renewal of the export licenses of some US beef plants to China, US beef exporters were sending 2,000-4,000t per week into China or over 200,000t worth nearly $2 billion annually. There was a big meeting in China last week to discuss the Chinese beef industry as part of its review of beef imports. This could have significant ramifications of our beef industry - stay tuned.
This chart shows the new country tariffs on goods imported by the US from each country vs its current trade deficit (the amount of goods bough from these countries by US vs amount of US goods sold to these countries). Source: Reuters.
Livestock
Markets shrugged off the impact of the 10 pc tariff announced on our beef and sheepmeat imports with local supply and demand considerations overriding the impact of the announcement with cattle markets gaining around 5 pc across the board as livestock movement across Queensland and parts of NSW was hampered. Australian beef prices in the US jumped as market uncertainty was removed and because of pent-up demand, as much trading in recent weeks had come to a standstill.
A similarly strong week for sheepmeat, assisted by a slowing in saleyard offerings as nervous producers held off until after Trump’s tariff announcement.
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Grain
US grain futures closed lower on Friday as news of China’s reciprocal tariffs reached the market. This basically means US won’t export much grain to China anytime soon. It would seem that global traders are still assessing the impact on trade flows as most international prices (outside of the US) were steady. The exception is for oilseeds as there will be more US soybeans looking for export homes given, they were a significant US export to China. It’s probably why there was a big meeting in the US last week to discuss altering US biodiesel policies.
Local wheat prices were steady although I expect the weaker $A to start breathing some life into export demand for Aussie grains which had just been starting to show signs of picking up. Feed wheat prices into SA lifted another $10/t to $285/t up around $30/t since November with basis increasing as the dry weather makes it more difficult to get grain out of growers hands in western Victoria and South Australia. It’s probably coming from the Riverina, so expect southern NSW prices to start moving higher as a result particularly, if it remains dry. Feed barley prices were up $5/t in most east coast feed grain markets.
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Wool
Wool gained another A4c/kg mainly on the back of improved buying for >18-micron wool. Fremantle (WA) led national price gains with all Merino types trading at levels of 25 to 35Ac/kg dearer for the week. A small but important win for the Western Australian sheep farmer had a win.
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Sugar
Sugar prices finished the week slightly lower at 18.84USc/lb (vs 18.96USclb last week) as fears of a global trade war prompted a rout in global equity markets and sparked risk-off sentiment in asset markets (which included most commodities…basically fund managers are moving into cash or gold), undercutting sugar prices. A lower Brazilian currency and good rainfall across Brazil through the week prompted farmer selling which added to sell-side pressure on the market.
The information contained in this article is given for the purpose of providing general information only, and while Elders has exercised reasonable care, skill and diligence in its preparation, many factors (including environmental and seasonal) can impact its accuracy and currency. Accordingly, the information should not be relied upon under any circumstances and Elders assumes no liability for any loss consequently suffered. If you would like to speak to someone for tailored advice relating to any of the matters referred to in this article, please contact Elders.