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Dry weather takes toll on Australian farmer confidence

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The latest Rabobank Rural Confidence Survey reveals that dry weather conditions have taken a toll on the nation’s farmer confidence by impacting grain yields in the critical lead-up to the harvest and hampered pasture growth for graziers.

The latest quarterly survey finds that Australian farmer sentiment has slipped further into negative territory, with a greater number of farmers expecting conditions to worsen rather than improve over the coming 12 months.

While 35% of the farmers (up from 31% in the previous survey) expect conditions to deteriorate in the year ahead, just 16% were positive (down from 19%). About 46% expected conditions to remain similar to the previous year.

The net rural confidence indicator has now sat in negative territory for the past 12 months, a reflection of the stronger market and seasonal conditions that had prevailed in the previous year.

Rabobank group executive for Country Banking Australia, Peter Knoblanche said the latest survey results reflected farmers’ disappointment in the season that conditions had not consolidated on the wetter start to the year.

Western Australia, a key grain-producing state has particularly been impacted by adverse seasonal conditions causing crop downgrades, while livestock graziers across Australia have been concerned about the impact of dry weather on feed reserves and saleyard prices.

Mr Knoblanche said that while seasonal conditions had been a key determinant of confidence this quarter, commodity prices also remained front of mind.

Highlights of the Rabobank Rural Confidence Survey report:

  • 40% of farmers expecting conditions to deteriorate over the coming year cited commodity prices as a primary reason
  • 20% cited the high Australian dollar, input costs and uncertainties in overseas markets as major drivers
  • 18% reported the emergence of seasonal conditions as a key concern
  • Sheep and beef producers in Western Australia are concerned about the future of the live export legislation
  • Farmers (grain and dairy) expect conditions to improve over the next 12 months with 45% attributing their optimism to commodity prices
  • 26% expect their own farm business performance to worsen (up from 21% in the previous survey)
  • 22% expect an improvement in farm business performance (down from 28% previously)
  • 34% expect a poorer gross farm income than that of last year (up from 25% last quarter)
  • 22% anticipated an increase in gross farm income (down from 26%)  
  • 85% expect to increase or maintain their level of investment in their farm business over the next 12 months (down from 89%)
States

Across Australia, all states were relatively subdued in their outlook for the year ahead, but confidence took the biggest knock in South Australia and Western Australia. Attributing this sentiment to dry weather, Mr Knoblanche explains that many were expecting a really good crop this season, but dry conditions, frost and some hail have impacted yield potential. Crops in the central and eastern wheat-belt of Western Australia have really taken a hit, although there are good pockets in the south-east of the state.

Grain growers in New South Wales were more upbeat than their sheep and cattle-grazing counterparts with the crops generally faring well in the lead-up to harvest. Though the weather may have impacted yields, many grain growers are going into harvest with good production and price prospects, while dry weather is limiting restocker demand in the sheep and beef markets, where prices were already flat.

The lack of good follow-up rains during spring, and the relatively flat price outlook for cattle also weighed on sentiment in Queensland. Tasmania’s vegetable and sheep producers expressed concerns about prices though the season has been holding up well.

Victoria’s farmers are currently the most positive in the nation, a significant turnaround from reporting the weakest confidence levels six months ago. Being the largest dairy-producing state, the shift in dairy farmer sentiment on the back of strengthening global fundamentals was the key driver of this upward swing in confidence.

Sectors

Sentiment was highest among the nation’s dairy farmers while sheep and cattle graziers were the most pessimistic about their prospects for the coming year. Dry weather dented confidence in the grains industry, with confidence well down from last quarter’s highs. Confidence in cotton remained steady, albeit negative, with prices almost halving in the past 12 months while the flat price outlook for sugar weighed on sugarcane grower confidence.

This quarter also saw a huge upswing in confidence in the dairy industry, which reflected the anticipated impact of slower production in the US and EU on the global dairy market.

The upbeat sentiment reported by grain growers last quarter has not been repeated with grain growers expecting yields to be down on initial estimates, though this will be offset somewhat by prices that continue to hold up well.

Sugarcane growers are now reaching the end of harvest, and have reported favourable harvesting conditions although growers in the key Burdekin/Herbert region have raised concerns about cane yields and sugar content levels. Meanwhile cotton growers have just completed planting, with water availability supporting irrigated crops while the drop in the cotton price has seen a swing away from dryland cotton.

The Rabobank Rural Confidence Survey has been conducted since 2000 by an independent research organisation interviewing an average of 1200 farmers throughout the country each quarter.

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