Australia’s farmers are approaching the end of the year with a hint of improving optimism as rural confidence levels nudge slightly higher.
The Q4 Rabobank Rural Confidence Survey found net level farmer confidence across the nation edged up marginally, after having dropped to the fourth lowest level in the survey’s history in the previous quarter.
Sentiment was mixed across the nation, with Victoria, Western Australia and Tasmania reporting lower farmer confidence levels. But, this was offset by an improved outlook reported by primary producers in NSW, South Australia and Queensland.
Overall, expectations around commodity prices were cause for optimism among those farmers with a positive outlook – particularly in the dairy and sugar sectors – while good seasonal conditions were nominated as a driver of confidence by 30% of farmers expecting the agricultural economy to improve in the coming 12 months.
However, worries about the softening of commodity prices – as well as the spectre of drought, with an El Niño now declared – were also the key factors weighing on rural sentiment, for those farmers looking ahead with a pessimistic view.
The latest survey, completed in November, found 14% of Australian farmers were now expecting the agricultural economy to improve in the next 12 months, up from 10% with that view last quarter, while 27% expected economic conditions to remain stable.
The largest percentage of farmers though (55%) still anticipate economic conditions will worsen. This had also risen (from 51% the previous quarter).
More farmers put down their negative outlook to softer commodity prices (64%, up from 60%) and worries about drought (45%, was 32%).
However, concerns around overseas markets/economies and rising interest rates lessened.
While commodity prices were also the dominant cause for optimism for those farmers with a positive outlook on the year ahead (nominated by 61%), these producers were also hanging their hopes on a better season (30%, up from 19% in the previous survey).
Rabobank Group Executive for Country Banking Australia, Marcel van Doremaele, said this reflected the mixed seasonal conditions experienced across the nation.
“Since then, climate-wise we’ve seen a range of conditions around the country with everything from severe bushfires, to damaging summer storms, to heat events, to welcome rain for some areas offset by ongoing dry conditions elsewhere.
“Western Australian, Victorian and Tasmanian farmers, in particular, are assessing the fall out of a very dry finish to spring.”
Many South Australian producers had a better-than-anticipated harvest result, although some did have to contend with late frosts and summer hailstorms, and now heavy early December rainfall.
“This was offset by a general lift in farmer confidence in New South Wales on the back of recent rainfall in central and northern parts of the state after a very dry run,” he said.
“Drought remains the chief concern in Queensland, although there has been useful – albeit patchy, summer storms.”
Put together, Mr van Doremaele said, these seasonal signals had buoyed the sentiment of those fortunate enough to receive beneficial rain, but intensified concerns about a dry year ahead for others.
While most drivers of sentiment were unchanged this quarter for beef producers, there was an increase in concern voiced about drought. Pic: Agrishots
Lower commodity prices remain top-of-mind for livestock producers nationally, especially for beef producers, albeit with some strength returning to the market in recent weeks.
After a tough run for Australia’s sheep producers, Mr van Doremaele said, confidence was shown to be starting to improve in the sector in the latest survey.
“We can thank rainfall events across the east coast for an improvement in markets as producers have more confidence to retain stock after a period of destocking,” he said.
“Improved feed availability prospects have increased demand pressure, especially for lighter stock.
“However, this price rise is expected to be tempered with the seasonal influx of stock into the market, through summer and into autumn.”
The Australian beef sector experienced a shift the other way, with confidence deteriorating this quarter after considerable price decline over the course of the year, albeit with a turnaround underway since November.
While most drivers of sentiment were unchanged this quarter for beef producers, there was an increase in concern voiced about drought.
“It really is a case of ‘just add rain’,” Mr van Doremaele said. “Although the rain which has fallen over eastern and northern Australia over the past weeks was too late to influence beef sector confidence in the latest survey, it has corresponded to a larger jump in cattle prices – particularly young store stock.
“Hopefully this improves producer outlook, especially if there is timely follow-up rain.”
Despite strong milk prices – supported by marginally-higher production this year – dairy farmers were more pessimistic this quarter, with more than half of respondents expecting conditions to worsen.
Cotton growers were among the least optimistic this survey, with net confidence falling from 5% last quarter well into negative territory (-38 %).
Sugar growers’ sentiment improved in the quarter, primarily fuelled by positivity about high commodity prices.