Farmer confidence bounces back

Rabobank has released its latest Rural Confidence Survey and results have shown optimism in the agri-sector rebounding to early-year highs.

Conducted quarterly, the survey questions an average of 1000 primary producers across a wide range of commodities and geographical areas throughout Australia.

The latest survey, completed in August 2016, saw the net national Rural Confidence index jump to 21 per cent, up from just nine per cent in the previous survey.

Overall, 37 per cent of the nation’s farmers expect conditions in the agricultural economy to improve over the coming 12 months (up from 28 per cent), while 16 per cent expect conditions to worsen (down from 19 per cent).

The majority of those surveyed have a stable outlook – 46 per cent expecting similar conditions to the previous 12 months.

Rabobank national manager of Country Banking Australia, Todd Charteris, says widespread and significant rainfall in June and July had soothed dry conditions across much of the country, underpinning strong prospects for the season ahead.

"The grains sector has significantly benefited from the timely rain, with a bumper crop on the cards, particularly in Western Australia," he says.

"Good yields will be critical this season, as grain prices remain weighed down by burgeoning global stocks of wheat, corn and soybeans."

Charteris adds beef and sheep producers are also upbeat about the outlook, with both weather conditions and markets going in their favour.

"While many graziers are coming out of a tough winter period, the good winter rainfall has set them up for fantastic pasture growth in coming weeks," he says.

The survey also found seasonal confidence and commodity prices to be the biggest drivers of confidence, with over 50 per cent of respondents citing both factors as cause for their optimism.

While market prices have buoyed the spirits of sugar, beef and sheep producers, the same cannot be said for dairy and grain farmers, with over 90 per cent of each group expressing negativity towards the agricultural economy.

"The 2016/17 season will remain challenging for those in the dairy sector, with milk prices below the cost of production for many producers," Charteris says.

"In light of this profound pressure on profit margins, thankfully there has been some cost reprieve with lower prices for fertiliser, temporary water and supplementary fodder."

However, he says there could be "signs of light at the end of the tunnel" for the affected producers.

"The taps of supply will start to turn off around the world, which should see global prices start to rise modestly in the first half of 2017."

The latest survey also showed a strong investment appetite in the agri sector, with 90 per cent of the nation’s farmers looking to increase or maintain their level of farm business investment over the coming 12 months – up from 87 per cent in the previous survey.

In line with overall confidence levels, farmers’ income expectations for the next 12 months also increased.

Overall, 36 per cent of Australian farmers are expecting higher gross farm incomes in 2016/17 than in the previous financial year, while a further 43 per cent expect a similar financial result.

Across the country, confidence increased or remained at stable levels in all states except Western Australia and Tasmania, the latter dipping to a three-year low on the back of extensive flood damage and ongoing challenges in the dairy sector.

The most significant upswing in sentiment was reported in Queensland, with significant rainfall driving net confidence to its highest level in the 15-year history of the survey.

The next survey results are scheduled for release in December 2016.