June 8, 2012
Drought may have long gone, but jittery market conditions and rising costs have sent farmer sentiment sinking back to the dark days of the big dry. Only Queensland producers are feeling notably more optimistic – and that’s climbing back from a prolonged stint at the bottom end of the table. More than a third of the nation’s primary producers (34 per cent) are expecting the farm economy to get tougher in the year ahead. Only 12pc felt conditions were likely to improve according to Rabobank’s latest Rural Confidence Survey of 1200 farmers – the most downbeat expectations since similar survey results in 2008 and 2009. Fortunately the climatic outlook is cause for optimism, with 39c of those with positive expectations citing seasonal prospects as the primary reason. Farm investment levels are also holding firm with 90pc still planning to maintain or lift spending on their business in the year ahead. “Production and yield are generally favourable but farmers are not getting the profit margins they did a year ago,” said Rabobank’s Rural Australia general manager Peter Knoblanche. “In part, this is due to a downturn in agricultural prices as a result of subdued investor confidence stemming from the problems in Europe and a slowdown in China’s economy. “It’s also partly due to oversupplies for some commodities off the back of favourable seasonal conditions in major production regions around the world.” Although the dollar had lately been more competitive against the US exchange rate its sustained historical highs of the past year had exacerbated a weakening trend for most agricultural commodity prices compared to 2011 – including, sheep values, dairy products, cotton and wool. Grain prices had also been trending down until revived by last month’s volatile spike prompted by fears about dry weather in the US and Black Sea regions. If they had not yet impacted on farm returns, Mr Knoblanche said farmers anticipated price and cost factors would in the future. About 36pc of respondents cited falling commodity prices as a primary reason for pessimism while 30pc nominated the high dollar and 21pc said rising input prices. Almost three quarters of farmers surveyed said farm input prices such as those for electricity, labour, fuel and fertiliser had risen in the past year. Only 24pc felt costs had remained constant. However, higher farm incomes are still anticipated by about 25pc (although that figure fell from 31pc in March) while half expected income to remain steady. The dip in income expectations followed a generally muted first quarter for gross farm income this year with only a third of producers surveyed recording better gross incomes than the same period in 2011. Rabobank found Queensland farmers were the most confident in the nation, thanks to favourable seasons and sound sugar and beef prices, while Victorians were least confident primarily due to anticipated step-downs in dairy prices. Overall, the sugar, cotton and beef sectors had been the most confident about their outlook during the past quarter. Mr Knoblanche said while sheep producers reported a notable dip in optimism reflecting declining lamb and wool prices, both markets were still at historically strong values.