Rabobank: Confidence returns to Australia’s farm sector

Confidence has returned to Australia’s farming sector following a mid-year dip in sentiment, according to the latest Rabobank Rural Confidence Survey.

The quarter three analysis found sentiment among the country’s agricultural producers had rallied heading into spring, with the drivers including more favourable livestock markets and beneficial rain in some cropping areas.

However, farm sector confidence remained just shy of net ‘positive’ levels – with still slightly more farmers holding a pessimistic outlook than those expecting a better year ahead.

Farmers had begun the year with a surge in optimism, but sentiment had fallen by mid-year due to the worryingly late – and in some cases no – ‘autumn break’ for winter cropping regions, especially in Western Australia and South Australia.

However, beneficial rainfall in the west and along the eastern seaboard put the brakes on sliding seasonal confidence this quarter. And improved prices for sheep and beef producers also supported optimism about the agricultural economy ahead.

Farmer confidence improved in every state, although only New South Wales and Tasmania recorded net positive sentiment (with more farmers expecting conditions to improve than deteriorate). Confidence also lifted in all commodity sector surveyed, except for cotton.

“Although some parts of the country are still grappling with the impacts of unusually dry weather through autumn and winter, it’s encouraging to see the patchy start to this year’s season have been corrected in many farming regions, especially in WA where seasonal conditions looked dire last quarter but have really turned around,” said Rabobank group executive for Country Banking Australia, Marcel van Doremaele.

“Farmers are still managing challenging conditions in south-west Victoria and across South Australia which continue to put pressure on winter crops and feed for livestock. And grain growers in these regions are particularly holding hope for good spring rainfall to finish crops following the very dry winter.

“The ENSO (El Niño Southern Oscillation) Outlook remains at La Niña watch – meaning there are signs La Niña may develop later in the year and the potential for a wetter spring has held promise during the survey period, which has helped confidence track back up.”

The nation’s farmers also reported a slight increase in appetite to invest in their farm businesses this quarter. More planned on increasing their level of investment in the year ahead (24 per cent, up from 21 per cent last quarter) although 14 per cent intended to invest less (compared with 13 per cent previously).

More farmers also expect their farm incomes to increase over the next 12 months – 30 per cent (up from 21 per cent last quarter), while the number expecting a lower income had declined to 27 per cent (from 32 per cent).

“Despite seasonal variability, the outlook for Australian agriculture this financial year is for growing production value, and average incomes for broadacre farms are anticipated to increase in 2024-25. This improvement in income supports farmers’ confidence in investing back into their business,” Mr van Doremaele said.

On-farm infrastructure – such as fences, yards and silos – remains the primary focus, although slightly fewer farmers across the country identified this as an area for investment this quarter (58 per cent, was 61 per cent last quarter).

Adopting new technologies was the second highest area of planned investment (31 per cent, down from 36 per cent last quarter), followed by new plant and machinery which was stable quarter-on-quarter at 22 per cent of farmers.

Appetite for rural land purchase remained stable this quarter, with 12 per cent (was 11 per cent) of farmers nationally expressing interest in expanding their farming operation.