Aussie farmers stay buoyant

Another big production year on the cards is underpinning continued strong confidence within Australia’s farm sector, according to Rabobank’s latest quarterly Rural Confidence Survey.

While overall net confidence has eased slightly compared to the previous quarter, a whopping 90 per cent of Australian farmers surveyed are still expecting the generally excellent business conditions currently prevalent in the agricultural sector to either continue or improve over the year ahead.

SEE ALSO: Farmer confidence surges to all-time high

Rabobank Australia CEO, Peter Knoblanche, said the latest survey results reflected the overall positive conditions the Australian ag sector is currently facing, with an “ideal combination of positive seasonal, financial and commodity market factors”.

“There is certainly a view out there among many farmers that business conditions right now are excellent. Many would say it’s as good as it gets, and they can’t see how it could get any better,” he said.

“Strong prices for grain and terrific growing conditions in most regions have driven another near-record winter crop planting program across the country, with early estimates for a second-straight year of bumper tonnages of wheat, barley and canola when harvested at the end of the year.

SEE ALSO: Winter harvest exceeds expectations

“Meanwhile commodity prices in the beef and lamb sectors are also supporting producer confidence, with low supply and high demand for protein pushing prices to levels not seen before. And dairy confidence is also strong on the back of favourable milk price contracts and improved water allocations.”

In another indication of the sector’s current financial strength and stability, the Rural Confidence Survey’s Farm Viability Index - which measures farmers’ assessments of their own business viability - hit a record 20-year high.

Completed last month, the latest survey found 35 per cent of farmers nationally were expecting conditions in the agricultural economy to improve over the year ahead.  While this was down marginally on the 39 per cent with that view in the March quarter, Knoblanche said this was likely a reflection of the view among some that business conditions in agriculture are about as good as they get.

A further 54 per cent of respondents were expecting the current positive conditions to continue for the coming 12 months, while eight per cent expected a deterioration.

Knoblanche said that while the current mouse plague was causing anxiety for farmers in affected areas, primarily in central western and northern New South Wales, it had not registered as a major concern in the survey, cited by five per cent of those expecting conditions to worsen as the reason for their pessimism.

Rural sentiment was found to be strong in all states and across all sectors.

Beef, lamb, and dairy producers were particularly buoyed by high commodity prices, while excellent seasonal conditions underpinned solid sentiment among cotton and grain producers.

Good commodity prices was revealed to be the primary driver of confidence this quarter – cited by 69 per cent of farmers expecting conditions to improve, while 51 per cent cited good seasonal conditions as the key reason for their optimism.

Knoblanche said 2021 was shaping up to be an instrumental year in the long-term prosperity of the Australian farming sector.

“For most farmers, we are seeing a second year of very good seasonal conditions, high to very high commodity prices, low interest rates and favourable infrastructure investment incentives from government,” he said.

“The benefit of another year like this for Australian farming shouldn’t be under-estimated. This will allow many farmers to really consolidate their position after years of drought – to further reinvest in their businesses to make them more efficient and resilient, and to expand and grow their businesses for the future.

“This is a sector which has made an excellent recovery after the drought and is helping power the nation through the challenges of the COVID-19 pandemic.

“Many of our country towns are booming, there is tremendous regional growth and employment and the strength and stability in the agricultural sector is playing a significant part in that.”

Knoblanche added a high level of confidence has also been recorded in areas where seasonal conditions had not been optimal heading into winter, such as the cropping regions of South Australia and north west Victoria.

Confidence was found to be strongest in Tasmania and New South Wales, where 45 per cent and 44 per cent of farmers respectively were tipping conditions to improve.

In NSW, a large boost to water allocations and the prospect of another big grain production year were sustaining high levels of farmer confidence, despite some concerns around the mouse plague.

In Tasmania, farm confidence hit a six-year high, with the state’s dairy farmers particularly upbeat on the back of good opening milk contracts and a great lead into winter.

Forecasts for farm business incomes and performance are holding firm, with 40 per cent of farmers surveyed expecting an increase in gross farm incomes in the next 12 months, while 45 per cent expect similar incomes to last year.

Knoblanche said with a great production year behind them, and another one on the horizon, many Australian farmers were making longer-term investment plans and putting money back into their own enterprises through equipment and infrastructure upgrades as well as property expansion. 

The survey found 34 per cent of those surveyed nationally expect to increase investment over the year ahead, while 60 per cent will maintain business spending at current levels.

“Farmers are taking the opportunity to improve their assets and upgrade their operational infrastructure while the seasons, commodity prices and interest rates are all working in their favour,” Knoblanche said.

And, while there was intense interest and competition for agricultural land, Knoblanche said, those farmers who weren’t in a position to buy more land were investing on-farm to make the property they own “work harder for them”.

Rabobank’s next quarterly rural confidence survey results are scheduled for release in September 2021.