Short-term farm sector confidence has taken a serious kick in the teeth as unusually dry conditions in many parts of Australia show little sign of breaking.
However, the seasonal knock has not shattered farmers’ positive longer term view, with 95 per cent foreseeing good viability prospects ahead and 91pc making investment plans.
In fact, almost all farm businesses with an annual gross incomes above $300,000 see good long-term viability, according to Rabobank’s latest check of farm sector expectations.
But the next 12 months could be tough.
Three months ago most farmers’ overall mood was rising, or hovering strongly in positive territory, but the second driest winter on record has pushed confidence to its lowest point in more than four years.
The fast-shrinking winter grain crop outlook and deteriorating pasture and soil moisture conditions are weighing heavily agricultural producers looking at the year ahead.
The wheat crop alone is set to sink below 22 million tonnes this year (down from a record 35m last year) as warm and windy spring weather sets in.
Rabobank’s latest survey found the percentage of farmers expecting the rural economy to worsen in the next 12 months had jumped from 10pc to 27pc in just three months.
Those with positive short-term feelings about the agricultural economy had almost halved in number to 17pc.
Victorians are the most bullish, helped by improving milk prices and a wet start to winter and more follow-up falls in August.
That welcome rain band also extending into southern NSW, northern Tasmania and parts of South Australia.
The most pessimistic commodity group is Queensland’s sugar sector, where a 40pc drop in the market since last October has 78pc of canegrowers tipping business conditions to worsen.
Dairy was the only sector with more farmers expecting economic conditions to improve than deteriorate.
Rabobank’s national country banking manager, Todd Charteris, was not surprised by the national confidence slide given the upbeat mood of the past 12 months was now being eroded by widespread concerns about poor soil moisture conditions going into spring.
“Much of Queensland remains in the grip of drought, most of central and northern NSW has endured one of the driest winters on record, conditions remain dry in the south and Midlands of Tasmania, and Western Australia and South Australia had a variable start to the cropping season,” he said.
Half the 1000 producers surveyed last month said the dry season would be a major reason for any deterioration in their business expectations in the year ahead.
Just 28pc had held that view last quarter.
More than three quarters of graingrowers with a negative outlook have blamed seasonal conditions, while the season has also unsettled beef and, to a lesser extent, sheep producers.
“Lack of rain is dampening restocker demand and has resulted in a flush of cattle come onto the market a little earlier than expected,” Mr Charteris said.
“This has seen saleyard prices, particularly for cattle, come off recent highs, although prices for beef and sheep are still well above five-year averages.”
Wool’s still wonderful
However, he noted wool markets were still at record levels and confidence in meat sector demand was still firm.
Wool had been the stand-out performer, with auction prices hitting new highs despite big volumes on offer of late.
He said the overall farm viability indicator was also near a 14-year high, with producers still “resoundingly positive” about the longer-term outlook despite lowering their 2017-18 income expectations.
While 44pc of farmers retained a stable outlook for their gross farm incomes, 29pc expected lower incomes (up from 19pc in May) and those with higher gross farm income expectations shrank to 25pc.