Farmer confidence surges to all-time high

Despite a year of major disruption and uncertainty in agricultural markets, Rabobank’s latest Rural Confidence Survey has shown farmer sentiment massively rebounding to achieve one of the highest rural sentiment readings in two decades.  

The bank said exceptional spring conditions across much of the country, record-breaking winter grains receivals and high livestock prices have all effectively outweighed concerns about the impact of COVID-19 and ongoing trade tensions with China.

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In addition, the Rural Confidence Survey’s farm viability index – measuring farmers’ assessment of their own business viability – hit its highest level in the survey’s history.

The latest survey, completed in November, found 43 per cent of Australian farmers expecting conditions in the agricultural economy to improve over the coming year, up from 24 per cent with that view in the September quarter.

The number with a pessimistic outlook also fell sharply – from 27 per cent last quarter to eight per cent – while 46 per cent of farmers expected conditions to remain the same.

Confidence is up in all sectors, but particularly strong among cotton, mixed beef and sheep producers and grain growers.

“While 2020 has been a year of great uncertainty and challenge for everyone in the community, for farmers the extraordinary turnaround in the season has also made it one to remember,” said Rabobank Australia CEO, Peter Knoblanche.

“After years of drought, and low or no returns for some, the tables have well and truly turned. Graziers who were able to hold on to sheep and cattle during the drought are now being well rewarded for it, with livestock prices reaching unprecedented levels during the spring and demand over the year ahead forecast to remain strong.

“Some of the regions which had been hardest hit by drought are seeing grain receival records smashed, with the highest harvest tonnages in at least 20 years, and in some places ever, being delivered across the NSW grain zone. Grain quality also is excellent in many areas. This harvest will deliver a huge boost to incomes and cash flow for many.”

Reasons for optimism and pessimism

When asked about the main reasons for their optimism, 74 per cent of farmers with a positive outlook cited good seasonal conditions while 54 per cent mentioned unprecedented commodity prices.

On the other hand, concern about overseas markets and economies was the dominant factor for those expecting business conditions to worsen over the year ahead – cited by 47 per cent with a negative outlook, while 16 per cent nominated concerns about trade with China specifically.

COVID-19 was shown to be less of a worry for farmers this quarter – registering lower on the list as cause for concern.

Across the states

Farm confidence was up across all states, the survey showed, but NSW led the pack with its highest sentiment reading since March 2008.

In the state, 57 per cent of farmers reported having a positive outlook on farm business conditions in the coming year (up from 39 per cent in September).  Only three per cent of NSW farmers reported having a pessimistic view (down from 20 per cent in the September survey).

In Victoria, previously-held concerns about the impact of COVID-19 have all but dissipated thanks to regular rainfall during spring aligning with high commodity prices, pushing farm business sentiment in the state to its highest level since 2014.

An 'almost perfect' spring across Tasmania has bolstered confidence in that state, with rural sentiment in the state rebounding to a 15-month high, and very few farmers expecting a deterioration in business conditions.

South Australian farm sentiment surged this quarter, with the biggest upswing in confidence in almost 15 years – 46 per cent of the state’s farmers reporting an optimistic outlook, up considerably from just 11 per cent last quarter. 

Expectations of a 'good average grain harvest' this year have helped rural sentiment recover in Western Australia, reaching a two-year high this quarter.

For Queensland, rural sentiment has made a strong comeback in all sectors this quarter, with cotton and grain producers in particular recording the largest upswing in optimism.  While seasonal conditions are still varied, and not all areas have received good rainfall or harvesting conditions, 37 per cent of Queensland producers now expect agricultural economic conditions to improve over the coming year – up from 23 per cent last quarter.

Sectors

Cotton growers were the most optimistic of all farmers this quarter, with 81 per cent nationally tipping an improvement in business conditions in the year ahead – a huge lift from the 33 per cent with that view in September, prior to crops being planted.

Knoblanche said planting conditions for cotton growers had been greatly improved while increased water allocations mean production levels will be much higher than past years.

Mixed livestock producers are the next most optimistic, with excellent pasture growth in many regions during spring – coupled with stellar prices – boosting income projections in the meat sector for the year ahead.

Grain grower confidence also rebounded strongly, with 44 per cent surveyed forecasting an improved outlook on the 12 months ahead compared with 28 per cent last quarter.

While significant uncertainty hung over wool and some lamb markets last quarter – mostly due to depressed wool prices and concerns about the impact of COVID-19 restrictions on a number of lamb processing facilities in Victoria – the sector’s confidence has recovered to levels now above where they were in March.

This quarter, 40 per cent of sheep producers said they were confident business conditions would improve over the coming year compared with just 10 per cent with that view in September.

Farm viability

The survey’s farm viability index showed 97 per cent of farmers surveyed reporting their businesses to be viable – the highest level in the survey’s history.

The outlook for farm incomes for the year ahead improved significantly in the latest survey, with 42 per cent expecting a higher gross farm income, up from 31 per cent last quarter.

New South Wales producers were the most bullish in terms of improved income expectations – 56 per cent of those surveyed expected incomes to be greater than in the previous 12 months. 

Farmers’ improved financial positions prompted them to think about investing and expanding their operations, the survey found.

One third of all farmers surveyed intended to increase total investment in their farm business over the coming year, compared to 25 per cent last quarter.

On-farm infrastructure and improvements were listed as the investment priority, while property purchase to expand farming operations made the list of 24 per cent of farmers with the desire to spend.

Knoblanche said the continuing strength of the Australian rural property market “hadn’t ceased to amaze”.

“A good season and low interest rates is continuing to support significant investment in rural property across Australia,” he said.

Rabobank's Rural Confidence Survey questions an average of 1000 primary producers across a wide range of commodities and geographical areas throughout Australia on a quarterly basis. 

The next results are scheduled for release in March 2021.