Australian Farmer Confidence Rebounds On Back Of Favourable Seasonal Conditions

Australian Farmer Confidence Rebounds on Back of Favourable Seasonal Conditions

Australian rural confidence has rebounded strongly as welcome summer rainfall and favourable commodity prices in a number of sectors have fuelled farmer optimism, according to the latest quarterly Rabobank Rural Confidence Survey.

Farmer confidence is now at its highest level since June 2008.

The rural confidence index is back in positive territory, with more farmers expecting conditions to improve over the next 12 months than those expecting conditions to deteriorate.

The latest survey - taken last month - found 30 per cent of farmers expected conditions to improve in the coming year, up from 23 per cent in the previous quarter. The number of farmers expecting conditions to worsen decreased to 19 per cent, down from 37 per cent last survey.

A comprehensive monitor of outlook and sentiment in Australian rural industries, the Rabobank Rural Confidence Survey questions approximately 1200 farmers across a wide range of commodities and geographical areas throughout Australia on a quarterly basis.

Rabobank general manager Rural Australia Peter Knoblanche said the survey had seen a general lift in farmer confidence as a result of consistent summer rainfall across much of the country, with positive sentiment strongest among those sectors also enjoying relatively high commodity prices, such as sheep, dairy and cotton.

"Favourable summer rainfall in many parts of the country has provided encouraging signs for farmers that the coming season could be a good one," he said. "Early season rain and more recent falls through February and March have provided relief for stock and pasture in many areas and very good summer crops in several key regions. The strong Australian dollar remains a frustration for many exporters however good prices for sheep, dairy, cotton and, still to some extent, sugar will buoy confidence in these sectors."

Mr Knoblanche cautioned that the strong rebound in confidence seen this quarter should not be mistaken as a sign that Australia had fully recovered from drought.

"Farmers in some areas, particularly SA, WA, northern regions of Victoria and southern NSW are still relying on a good autumn break with significant follow-up rain to come, which is going to be essential for them to have a reasonable season ahead and also to impact on confidence levels in the longer term," he said.

The Rabobank Rural Confidence Survey showed, not surprisingly, that an expectation of more favourable seasonal conditions was the main driver behind increased farmer confidence this survey. Of those primary producers who expected conditions to improve over the next 12 months, 41 per cent nominated seasonal conditions as a major contributing factor.

Increasing commodity prices were also top of mind, cited by 36 per cent of respondents.

Conversely, commodity prices were also cited as a concern though among those farmers who felt conditions were going to worsen - primarily grain and mixed farm operators impacted by lower grain prices.

The survey found that rising input costs were an additional concern for those farmers who indicated a reduction in confidence. Of those primary producers who had expected conditions to decline over the next 12 months, 29 per cent nominated rising input costs as a major contributing factor, up from 14 per cent the previous quarter.

Farm business performance and income

In terms of farmers' own operations, the Rabobank survey found 36 per cent of respondents expected to see improved performance in their business over the next 12 months, compared to 31 per cent last quarter. This is significantly higher than farmers' expectations of the overall agricultural economy.

Consistent with the increase in business confidence, farmers' income expectations have also increased. Overall, 32 per cent of respondents expected to have higher incomes over the next 12 months, compared with 28 per cent with that expectation in the previous survey. The number of producers expecting lower gross farm incomes decreased to 16 per cent, compared to 33 per cent last quarter.

The improvement in income expectations comes after a mixed year for gross farm incomes in 2009. A total of 31 per cent of Australian producers reported higher gross farm incomes in 2009 compared to the previous year, with 41 per cent reporting lower incomes.

States

With the exception of South Australia, the Rabobank survey found rural confidence was stronger in all states, with the largest increases observed in New South Wales and Queensland.

Sectors

Farmer sentiment was stronger across all agricultural sectors, with marked increases observed among dairy and sugar producers.

Over the past two years, sugar has moved from one of the most pessimistic sectors to the most optimistic. However, Mr Knoblanche said, more recent softening of global sugar prices may be reflected in the next survey.

To arrange an interview with Rabobank general manager Rural Australia Peter Knoblanche, or for more information on Rabobank's Rural Confidence Survey, please contact:

Denise Shaw
Public Relations Manager
Rabobank Australia & New Zealand
Phone: 0281152744 or 0439603525
Email:[email protected]

SOURCE: Rabobank