BUOYANT wool and beef prices in January have pushed the Westpac/NFF Rural Commodity Index towards late 1980s levels.
The index jumped by 3.7 per cent in January, up to 115 points, aided by a 20.4 per cent hike in wool prices and a 2.9 per cent jump in beef prices. that helped offset falls in wheat (down 5pc) and sugar (down 18pc).
Unfortunately sugar prices dropped by due to an expected 30pc jump in Brazilian cane production.
Westpac economist Jock Whittle said importantly the $US index had also rallied (up 1.9 per cent), pointing to an increase in demand for Australian commodities, rather than a $A-fuelled jump.
In the past the commodity index in $A terms has risen, when the $US commodity index has fallen or tracked sideways, suggesting buyers were capitalising on cheaper exchange rates rather than pushing prices up due to increased demand.
Now the $US index has risen, the current prices on offer to growers appeared that bit more sustainable, Mr Whittle said.
However, there is still a big gap between the two.
Compared to a year ago the $A index is 5.8pc higher, while the $US index is 2pc lower.
But, in a promising sign that agriculture is weathering the economic slowdown prompted by the events of September 11, the $US index is now 15pc higher than the lows recorded after September 11. This isn't confined to agriculture though, as most commodities have also enjoyed a lift in the past three months.
And the index in $A is approaching the highs achieved last year when the dollar was well
Mr Whittle said with wool, beef and wheat comprising 75pc of the index, a thriving wool market, continued strength in the cattle market, and stability in the wheat market, would probably prompt the commodity index to push higher again in February.