Farmers more positive after good spring crops: Rabobank survey

Australian farmer confidence has staged a mild recovery off the back of good spring seasonal conditions across much of the country, according to the latest quarterly Rabobank Rural Confidence Survey.

The survey found 24% of primary producers expected the agricultural economy to improve in the next 12 months, which was up from 18% in the previous quarter.

The number expecting conditions to deteriorate dropped to 20% from 35% previously, according to the Rabobank Rural confidence survey, which has questioned about 1,200 farmers each quarter since 2000.

Rabobank general manager Rural Australia Peter Knoblanche says very good growing conditions throughout spring across much of the country had been the major factor boosting farmer confidence.

“We are now looking at one of the biggest grain harvests on record, although recent rains in northern and central New South Wales, as well as parts of Victoria and Western Australia, have delayed harvest and impacted the quality of the grain coming off,” he says.

Knoblanche says although farmers have been buoyed by the positive spring conditions, concerns about another wet finish to harvest and into summer are keeping confidence at subdued levels.

“With a La Nina weather pattern back this year, farmers are on tenterhooks that there might be a repeat of last year’s wet summer that saw what would have been a good year for grain marred by a wet harvest and rain damage,” he says.

Of those expecting the agricultural economy to improve over the next 12 months, 49% cited seasonal conditions as a driving factor, while 40% nominated commodity prices.

Farmers had mixed views on commodity prices, with prices also being nominated as a concern among those expecting the conditions to deteriorate.

“While beef and sheepmeat prices have held at relatively high levels, grain prices have been softening – and have come off even further since the survey was taken,” Knoblanche says.

Other concerns included overseas economies and markets (21%) and rising input costs (20%).

Public policy and government intervention – of major concern for farmers last quarter – were still an issue, cited by 27% though well down from 45% previously.

Farmers’ expectations of their own business performance had also improved.

The Rabobank survey found 38% of those surveyed expected to see improved performance in their business over the next 12 months, up from 31% last quarter.

Only 9% expected their business performance to worsen, down from 21% previously.

The improved income expectations have followed a generally favourable third quarter for gross farm income this year.

Knoblanche notes a total of 45% of Australian producers surveyed reported higher gross farm incomes compared with the same period the previous year, 35% the same and 18% lower.

The survey found all states recorded improved sentiment compared with the previous quarter, with confidence strongest in Western Australia and Tasmania.

Knoblanche says Western Australian farmer confidence was driven by very positive seasonal conditions experienced in the state, although excessive rainfall had impacted cropping.

“Quality is expected to be lower on large tonnage as a result,” he says.

“However the yield will hopefully help offset quality issues and lower commodity prices.”

Knoblanche says Tasmanian confidence was largely driven by plentiful spring rainfall, especially in the areas that had been drier.

“If the higher than average rainfall continues into the remainder of the year, good pasture cover should continue well into summer for graziers, while crop yields are expected to be good,” he says.

South Australian farmer confidence had improved slightly from last survey, however SA was the only state still reporting negative sentiment – with more farmers expecting conditions to worsen than the number expecting them to improve.

“The reality is things are still pretty good in South Australia, but the state is coming off an extraordinarily year in 2010 which saw a record-breaking crop and excellent conditions for livestock and this appears to be influencing their feelings about the year ahead,” Knoblanche says.

Softer commodity prices in the grain sector were also subduing South Australian farmer confidence levels.

Improved seasonal conditions were the main driver of the improved confidence among New South Wales farmers.

“However, in the north of this state, in recent weeks it’s become a case of ‘too much of a good thing’,” Knoblanche says, “with floods affecting cotton crops in the north west and negatively impacting on grains in some other areas.”

Concerns about rainfall impacting on this year’s grains crop was also keeping Victorian farmer optimism in check, although the state had also seen some rise in rural sentiment.

Queensland rural confidence levels also remained relatively low, though optimism was being driven by expectation of good commodity prices in the meat and sugar sectors.

Confidence had improved in all sectors, except dairy.

“With the case of dairy, it’s more a matter of returning to the status quo after very high confidence levels seen in this commodity earlier in the year,” Knoblanche says.

“That said, production looks good in most dairying areas, although farmers are anticipating some wind back in milk prices which has dampened sentiment slightly.”

Beef was the sector with the highest confidence levels, staging a dramatic turnaround from the previous quarter – when beef producers had the lowest confidence.

Knoblanche says generally solid prices in the livestock sectors were experienced through the survey period.

Graziers were also benefiting from good pasture growth due to spring rains.

The outlook among the grain sector is less positive, he says, with a significant differential in prices for milling and feed grain wheat.

“This is due to residual levels of feed grain held over from last year and a generally softer outlook for global grains this year,” he says.

Cotton and sugar cane sector confidence also improved, though with sugar still at relatively low levels.

“Prices for both these commodities eased over the quarter although remain stable and above the historical average,” Knoblanche says.

“For cotton, there has been a successful start to the season with an abundance of rain following planting, although the rain has caused some damage to the predominantly dry land crops around Moree.

“Cane growers have had favourable weather through the Australian crush which is drawing to a close. However weather-related impacts from last season limited Australian sugar production in 2011.”