31 March 2003

Results at a Glance:

• Rural confidence continues to improve across all regions and sectors.
• Investment intentions and income expectations have improved since last quarter.
• Higher prices for cattle, sheep, wool, cotton and sugar have influenced sentiment, offsetting falls in wheat and other grain prices.
• Income levels in 2002 were generally lower than 2001 due to the adverse season.
• The stable interest rate environment is also positively influencing sentiment
  

There has been a significant improvement in rural sector confidence, with 40 per cent of farmers now expecting the agricultural economy to improve over the next year, according to the latest quarterly Rabobank Rural Confidence Survey.

Farmers' investment intentions and income expectations have also shown healthy increases on the back of improved sentiment, according to Rabobank general manager Rural Australia Neil Dobbin.

"In the previous survey only 25 per cent expected an improvement in their fortunes, so I think we can interpret this as quite a significant upturn in sentiment," he said.

Mr Dobbin attributed the more positive outlook to a belief that the worst of the drought was over, combined with favourable prices for most commodities.

"Even though many areas of Australia have not received enough rainfall to be sure the drought has broken, there appears to be a perception that it is coming to an end," he said.

"Sentiment has also been positively impacted by the strong financial position of many farmers prior to the drought, as well as recent price increases for a number of commodities. Higher prices for cattle, sheep, wool, cotton and sugar have influenced sentiment, offsetting falls in wheat and other grain prices."

Mr Dobbin said any concerns farmers have about the effect of current international instability on Australian agriculture would not have impacted on the survey, as it was taken prior to the escalation of military activity in Iraq.

The survey showed that rural confidence improved across all regions and sectors, with farmers in Victoria and South Australia the most optimistic of all. New South Wales was the least optimistic state.

"Given the severity of the season in New South Wales, with the entire state drought-declared, it is not surprising that confidence is lower there than elsewhere," Mr Dobbin said.

Of the different farm sectors, confidence among cotton producers was the highest and had improved most sharply. Mixed farmers (grain and sheep) were also reasonably confident, with improved wool prices and the prospect of a good winter crop off-setting recent falls in wheat prices. While sugar farmers remained the least optimistic, there was a sharp increase in sentiment among this sector as a result of some price improvements and generally favourable growing conditions.

Consistent with improved confidence levels, Australia's primary producers also had higher expectations for a rise in their gross farm incomes. Of those surveyed, 39 per cent anticipated their incomes would climb in the next 12 months. This compared with only 24 per cent who had those expectations in the previous survey.

"Income projections have improved with the expectation of a favourable season in 2003, underpinned by an optimistic price outlook for most commodities," Mr Dobbin said.

The positive expectation for farm incomes follows a generally poor 2002, with 50 per cent of primary producers reporting their 2002 income levels had been lower than 2001, due to the dry conditions.

"These dry conditions were the major contributing factor to the fall in income, with lower milk and sugar prices also a factor in those farm sectors. Sheep farmers were the only sector reporting higher incomes, due to the improved wool prices," Mr Dobbin said.

Investment intentions among farmers were also higher, with 28 per cent of survey respondents expecting to increase farm investment in the next year, compared with only 19 per cent in the previous survey.

Concerns about interest rates continue to ease, with 60 per cent of farmers surveyed believing rates would stay the same or fall over the next 12 months.

Mr Dobbin said the positive sentiment among Australia's farmers demonstrated their confidence in the long-term prospects of the sector.

"After a difficult year in 2002, farmers are looking forward to a return of normal seasonal conditions and to capitalising on the relatively favourable commodity price outlook," he said.

The Rabobank Rural Confidence Survey is a quarterly monitor of outlook and sentiment in Australian rural industries. The only study of its type in Australia, it is conducted by an independent research organisation interviewing a panel of approximately 2100 farmers throughout the country. The next results will be released in June.

Contact

For further information about the Rural Confidence Survey, please contact Denise Shaw, Public Relations Manager (Tel: +61 2 8233 8744) or email on sydney.confidence.survey@rabobank.com.