AGRICULTURAL prices continued to diverge in September, while the effects of El Nino ramping up are clouding production outlook.
That's according to the October Rural Commodities Wrap report released this week by National Australia Bank (NAB) Agribusiness.
It reports that most major grains fell, with wheat down almost 10 per cent in AUD terms.
Prices for fruit, vegetables and trade lamb (reflecting seasonal trends) also fell.
However, dairy prices strongly rebounded on supply concerns.
Sugar, beef and rice were also higher in AUD terms.
NAB reports its Rural Commodities Index fell 1.5 per cent in AUD terms and 4.1 per cent in USD terms.
After dropping below US70 cents in mid-September, the AUD since rallied and is now above US73c.
NAB's Australian dollar forecasts are unchanged for the currency to bottom out in the first quarter of 2016 at US68 cents.
Interest rates are expected to remain at 2 per cent for the remainder of 2015.
"Signs that the effects of El Niño are ramping up clouds the production outlook, particularly coming into summer," NAB reports.
"While we have previously highlighted the risk of El Niño to Australia’s wheat crop, the later onset of El Niño now means that the major climatic risk is for graziers and summer crops.
"If rainfall continues to trend below average, cattle restocker interest could dissipate and herd rebuilding could be pushed back after a prolonged period of elevated slaughter.
"We have adjusted our price forecasts in line with market conditions.
"We have held our beef price forecast track steady this month, although a continued decline in saleyard prices (as seen in early October) could see our forecasts revised lower towards the end of the year.
"We see further upside for dairy prices with continuing strength in Global Dairy Trade auction results, reflecting supply concerns brought on in part by El Niño."
