Financial jitters and seasonal unease are hitting farmer spending plans and crimping earnings expectations for the year ahead.
Although just over half the sector is still fairly upbeat about business conditions remaining much the same as last year, concerns about falling commodity prices, rising interest rates and the return of drought are gnawing at farmer sentiment.
However, property purchase intentions are still solid, or up slightly, and borrowing plans for off-farm investments have lifted marginally, too, according to Rabobank.
Overall, the agribusiness lender's latest monitor of Australian farmer confidence levels has gone into retreat - again - falling to its lowest point since the drought was biting hard in 2018.
RELATED READING
On a national average, the number of farmers expecting the farm economy to improve in the coming year dipped to 11 per cent in the first quarter of 2023, compared with 15pc in December 2022.
Just three months ago Rabobank's Rural Confidence Index had staged a rally as a huge harvest rolled in and generally robust seasonal conditions augured well for the start of the new year.
The beef sector has recorded the biggest slump in sentiment since Christmas, with just 10pc of producers expecting the agricultural economy to improve, almost 40pc tipping a decline and 48pc hoping prospects will hold firm.
The beef producer mood has translated to the wider Queensland picture, where only 10pc of all farmers expect an improvement, with drying seasonal conditions contributing to their sentiment.
WA, Tassie upbeat
Higher interest rates and lower commodity price expectations have bitten into sentiment in Victoria, NSW and South Australia, but Tasmanian and West Australian farmers were feeling more confident than in December, despite market and financial pressures still being on their radar.
In general, the number of farmers describing themselves as "easily viable" or "viable" remained unchanged, although fewer said they would inject more investment money in their business.
About 56pc would keep farm-related debt levels the same (up from 53pc in December) and fewer (14pc) intended to increase debt.
Those with expanding investment spending intentions shrank from 27pc to 25pc, while the number of farmers planning to cut investing commitments grew from 9pc to 12pc.
"Commodity prices, global economic challenges and high production costs compounded this quarter to contribute to a more unfavourable outlook from a gross farm income perspective," said Rabobank Australia's chief executive officer Peter Knoblanche.
"These key drivers also pulled together to dampen investment intention."
Water, fencing focus
Most of those with increased spending plans told Rabobank's national survey of 1000 producers, they would put funds towards on-farm infrastructure, including silos and fences, a spending category which attracted the same sort of interest (79pc) last quarter.
A heightened focus on seasonal resilience has emerged, with more farmers channelling funds towards irrigation and stock water infrastructure, up from 26pc to 30pc.
Buying plans for new machinery have cooled (from 50pc to 44pc), livestock purchase plans are down by similar degrees (from 47pc to 41pc, and enthusiasm for new technologies slipped slightly to 42pc.
The main factor driving those with negative outlook is falling commodity prices, a worry for 68pc of those expecting conditions to worsen - up from 21pc previously - while interest rates were a concern for 20pc, up from 11pc
There was some relief about some decline in fuel, fertiliser costs, although energy and other farm input costs remained a concern for 35pc of farmers expecting conditions to worsen in the coming year.
Commodity prices were also still cause for optimism among farmers with positive views on the year ahead.
Buoyed by strong markets
Farmers who expected business conditions to improve were buoyed by commodity prices which are still strong - particularly for dairy, cane and beef producers.
About 55pc of those respondents cited this as a reason for their positive outlook, or a similar level to the previous quarter.
Confidence in overseas markets contributing to good economic conditions was nominated by 26pc as cause for their positive outlook (up from 18pc).
As we see the heat come off many commodity prices - albeit down from significant highs - farmers recognise conditions will start to return to more normal levels
- Peter Knoblanche, Rabobank
Mr Knoblanche said the feedback survey reflected farmers' preoccupation with commodity prices, global economic challenges and high production costs facing their businesses.
"Despite having their resilience tested throughout 2022, most Australian farmers ended last year on a high, with farm production value records breaking for the third year in a row," he said.
"However, as we see the heat come off many commodity prices - albeit down from significant highs - they recognise conditions will start to return to more 'normal' levels.
"This survey captures their realistic expectations that commodity prices will likely not return to the highs this year that we saw in the previous 12 months, and the anticipation of further interest rates hikes will continue to place pressure on farm budgets."
Underpinning those economic realities were concerns about drought by about 13pc of farmers with a negative outlook - up from just two per cent in the previous quarter.
Start the day with all the big news in agriculture! Sign up below to receive our daily Farmonline newsletter.
Andrew Marshall
Andrew Marshall is the group agribusiness writer for ACM's state agricultural weeklies and websites. He is a former editor at The Land and has worked in various Rural Press group roles in Canberra, North Richmond (NSW) and Toowoomba (Qld).
Andrew Marshall is the group agribusiness writer for ACM's state agricultural weeklies and websites. He is a former editor at The Land and has worked in various Rural Press group roles in Canberra, North Richmond (NSW) and Toowoomba (Qld).
