Smooth sailing year for ag: Rabobank

A recent report by leading food and agribusiness banking specialist, Rabobank, predicts an overall positive outlook for Australian agriculture for the year ahead, but warns some global factors may lead to uncertainties in the longer term.

In its annual Agribusiness Outlook publication, Rabobank says certain elements including a projected rise in global economic growth and above average farmgate prices for most livestock and crops are expected to produce a fairly good year for the farming industry.

High dam levels, neutral climate indicators and strong on-farm confidence are also expected to drive optimism and growth in the industry.

"Key dam levels are high following a wet 2016, ensuring good supply and lower pricing for irrigation water in most regions," says report lead author and RaboResearch Food & Agribusiness general manager, Tim Hunt.

"While on-farm, confidence levels are strong among producers and their investment intentions are increasing."

However, Rabobank warns it is not all roses for the industry.

"Some storm clouds are gathering on the horizon that will bring at best uncertainty and at worst the prospect of significant turbulence in years to come, in particular on the economic and regulatory fronts," the report says.

One of the "storm clouds" is the recent commencement of the Trump administration in the US, which Rabobank says will bring some potential short-term benefits for Australian agriculture, but considerable uncertainty and concern for the medium-term.

"Fiscal stimulus, tax cuts and reduced US regulation are likely to underpin solid near-term economic growth in the US – contributing to a strong consumer economy and demand for the agricultural products Australia exports to the US," Hunt says.

"These same factors may also contribute to a stronger US dollar in 2017, which improves the competitiveness of our producers against the US in markets where we compete head-to-head."

However, Hunt says the new administration brings with it a "huge degree of uncertainty about what will be implemented, and its impact on the global economy and geopolitics".

"The policies of the Trump administration may contribute to a rising trend in protectionism already evident in recent years in many parts of the world – from which Australia, as an export-oriented agricultural producer, has much to lose."

Despite this, Rabobank Australia national manager of Country Banking, Todd Charteris, says the local ag industry should enter any potential turbulence in good shape, and that "turbulence can bring opportunities as well as threats."

He adds the agri sector needs to work to manage this period of uncertainty as well as it could.

"As the report finds, this will include seeing if anything can be salvaged from the ashes of the TPP and advancing bilateral trade agreements (including positioning for a FTA with the UK when it leaves the EU)," Charteris says.

"And beyond the trade realm, securing partnerships and stable routes to market will be more important than ever."