25 August 2003

Results At A Glance:

 

• Rural confidence has declined throughout Australia.
• Sentiment is weaker across all regions and all rural industries.
• The rising Australian dollar has negatively influenced sentiment.
• Investment intentions and income expectations are stable, indicating a level of underlying confidence.
  

Rural confidence has weakened as Australia's farmers anxiously wait to see how the agricultural season will unfold, according to the latest quarterly Rabobank Rural Confidence Survey.

 

The survey found 36 per cent of the country's primary producers expected the agricultural economy to improve over the next 12 months.

 

This compared with the previous survey, where 42 per cent of respondents had indicated they expected the agricultural economy to improve.

 

Significantly, 28 per cent of producers actually expected conditions to worsen over the next 12 months, up from 19 per cent last quarter.

 

Rabobank general manager rural Australia Neil Dobbin said the fall in rural confidence comes after significant improvements in sentiment over the previous three quarters.

 

"After a period of rising confidence, it seems farmers are now more cautious," he said.

 

Mr Dobbin said the survey results reflected the fact that primary producers were waiting anxiously to see how the season would "pan out".

 

"Many parts of the country are still in a 'green drought'," he said. "While seasonal conditions have improved in many areas, there have not been the significant substantial rainfalls that are needed in eastern Australia.

 

"These rains are needed to restore levels in dams and irrigation storages and to set the foundation for good pasture growth."

 

Mr Dobbin said it was a critical time of the year for farmers with winter crops in the ground, cane harvesting in progress and cotton planting to commence in coming months.

 

"It's still relatively early in the winter cropping season particularly and, given the variability in conditions experienced over the past few years, farmers are naturally conservative in their outlook," he said.

Mr Dobbin said sentiment had also been negatively influenced by the higher Australian dollar and volatility in commodity prices.

 

The survey showed the rise of the Australian dollar had dramatically affected farmers' confidence, with 72 per cent of respondents reporting that the dollar had negatively impacted their business.

 

The latest Rabobank Rural Confidence Survey showed sentiment was lower across all states and industry sectors, with cotton and sugar particularly affected.

 

Victorian farmers were the most optimistic of all states surveyed (42 per cent expecting conditions to improve), while Tasmanian primary producers registered the lowest levels of optimism (only 23 per cent expecting an improvement in the agricultural economy).

 

Of the different commodity sectors, mixed livestock/grain farmers were most confident.

 

Mr Dobbin said while headline confidence had fallen, several other indicators, such as investment intentions and income expectations, were stable or had improved slightly, indicating that underlying confidence has been maintained.

 

The effects of the 2002 drought were reflected in the gross farm income levels reported in the survey. Of those surveyed, 58 per cent reported lower farm incomes in the 2003 financial year compared with the previous year.

 

Incomes were lower across all sectors, with dairy producers the worst off, having been significantly affected by reduced production and lower milk prices.

 

Respondents were, however, generally confident about their income levels over the next 12 months, with 47 per cent expecting higher incomes compared with only 25 per cent anticipating lower incomes.

 

Mr Dobbin said grain farmers were the most confident about future income, reflecting the prospects of an improved season for many grain growers.

 

"Sheep farmers expressed concerns about their income levels dropping due to the uncertain outlook for wool prices and the possibility of lamb prices falling from the current very high levels," he said.

 

"Cane growers were also concerned about their income prospects due to recent international falls in sugar prices and worse than expected cane yields in many areas."

 

Of those farmers surveyed, 31 per cent expected to increase investment in their farm businesses, up from 30 per cent in the previous survey. A further 51 per cent expected their investment levels to remain static.

 

The survey found farmers were generally not concerned about the direction of interest rates with 79 per cent of respondents believing rates would stay the same or fall over the next 12 months, compared with 64 per cent last quarter.

 

 

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 December.

 

Rabobank Australia is a part of the international Rabobank Group, the world's leading specialist in food and agribusiness banking. Rabobank has more than 100 years' experience providing customised banking and finance solutions to businesses involved in all aspects of food and agribusiness. Rabobank has a AAA credit rating and, in recent years, has twice been awarded the title of the world's safest bank by Global Finance magazine. The bank operates in 35 countries, servicing the needs of more than nine million clients worldwide through a network of more than 1900 offices and branches.

 

Rabobank Australia is one of Australia's leading rural lenders and a significant provider of business and corporate banking and financial services to the Australian food and agribusiness sector. The bank has 39 branches through Australia.

Contact

For further information please contact Denise Shaw, Public Relations Manager (Tel: +61 2 8233 8744) or email on sydney.mediarelations@rabobank.com.