A hot, dry summer has knocked more stuffing out of farmer confidence levels in many parts of Australia, but it hasn’t dented the appetite for property acquisitions or investment projects.
The prominent Rabobank confidence indicator of Australian farmer sentiment has dropped back to negative territory, recording one of its lowest readings in four years.
Western Australia and South Australia are the only states bucking the trend, particularly WA, following good summer rain in many areas.
Although useful rainfall also fell in parts of eastern Australia after the latest survey of 1000 primary producers was completed, Rabobank noted concern about the season was again proving to be a handbrake on farmers’ overall outlook for the year ahead.
For the second consecutive quarter unease about low soil moisture conditions and dry weather patterns pushed the confidence index down, driving it from 16 per cent in December to minus 2pc for March.
Most commodity sectors are looking at another year of strong prices
Rabobank’s February survey found more farmers (21pc) had a negative outlook for the agricultural economy for the coming year than a positive view (19pc).
The mood in droughty Queensland was particularly depressed – as bad as 2014 – despite some good seasonal conditions over summer in the state’s north and east.
Much of NSW was feeling weather-beaten, too.
However, significant rain across parts of eastern Australia in the past fortnight gave some renewed cause for optimism, said Rabobank Australia’s chief executive officer Peter Knoblanche.
Much would hinge on further rainfall in coming weeks, although he emphasised the “fundamentals for the agriculture sector” remained bullish.
“Most commodity sectors are looking at another year of strong prices,” he said.
“You only have to look at investment activity within, and from outside, the sector to get a gauge of how Australian agriculture is faring.
“The survey found a quarter of farmers are actively looking at increasing their investment this year.”
Overall, 29pc of farmers still expect higher gross farm incomes in 2018 (down slightly from three months ago) while 46pc foresee similar financial results to last year.
The confidence report comes just ahead of national commodity forecaster the Australian Bureau of Agricultural and Resource Economics and Sciences releasing its projections this week.
Agriculture’s economic pulse and overall prospects will be the focus of two full days of forums attended by agribusiness and farm sector leaders in Canberra, starting on Tuesday.
According to Mr Knoblanche there was plenty of evidence of long-term confidence in the sector being not just sound, but robust.
More than a quarter of those farmers looking at increasing investment in 2018 intended buying extra property.
Property acquisition interest was strongest in Victoria, WA, SA and NSW and flowing through to robust demand in many regions.
The anxious wait for the autumn break that had impacted farmer confidence this survey
Many agricultural commodities were experiencing sound market conditions, underpinned by positive global economic factors, improved market access, low interest rates and softer fertiliser and irrigation water costs.
“The anxious wait for the autumn break that had impacted farmer confidence this survey,” he said.
Rabobank’s research found 36pc of farmers who expected conditions to worsen in the next 12 months cited the dry season as reason for their pessimism.
The season was particularly concerning for those in NSW and Queensland at 55pc and 45pc, respectively.
Concern about commodity prices has also heightened among dairy and sugar producers.
Global sugar markets are oversupplied and farmgate milk price prospects for 2018-19 season remain “a little uncertain”, although are expected to stay profitable, Mr Knoblanche said.
Confidence had also slipped, to a lesser extent, among beef and cotton producers.
Sentiment was up in the grain sector, and strong in the sheep industry, with graingrowers hoping markets keep strengthening, while wool, lamb and mutton prices are still at historic highs.
He said sheep producers continued to have their “time in the sun”, with the smaller domestic sheep flock, together with strong export demand, expected to underpin prices during 2018.
Sheep and grain producers were particularly positive about their business performance prospects, with 38pc and 36pc, respectively, anticipating a higher gross farm income this year.
WA farmers, overall, have strong expansionary intentions for 2018, with 35pc planning to increase investment, primarily in farm infrastructure.
Investment appetite is also strong in Tasmania, where 68pc of those planning to increase investment are directing it to water infrastructure.