31 May 2004

 

Results at a Glance:

 

• Rural confidence has continued to decline throughout Australia.
• Sentiment declined sharply in New South Wales and Tasmania and remained weak in other states.
• Concerns over prolonged dry weather had negatively impacted on sentiment.
• Income expectations and investment intentions were also lower.
• Confidence was sharply lower amongst livestock producers.

 

Confidence among Australia's farmers has continued its downward trend, with just 16 per cent of primary producers expecting an improvement in the agricultural economy in the next 12 months, according to the latest quarterly Rabobank Rural Confidence Survey.

 

This is the fourth consecutive survey in which national rural confidence has fallen and compares to the previous quarter, in which 25 per cent of farmers believed the agricultural economy would improve.

 

Rabobank head of rural banking Australia & New Zealand Neil Dobbin said, while the latest results had sentiment at its lowest level in almost two years, recent rain across many parts of Australia looked set to see a turnaround occurring in farmer confidence in coming months.

 

The survey was taken before widespread rain in many regions over the past week.

Mr Dobbin said a significant reason for the most recent decline in confidence had been growing concerns about the prolonged dry weather being experienced in much of the country. Concern about the direction of commodity prices had also negatively influenced sentiment.

 

"There has been a building level of anxiety in much of New South Wales, Victoria and South Australia that they have been heading for yet another dry year. Farmers in many areas of eastern Australia had been questioning whether the drought is actually over," he said.

 

"The good news is that decent rains over the past week have given many primary producers reason for optimism. However, while they are very welcome, we will need a lot more follow-up rain to turn conditions around."

 

The latest results showed seasonal conditions had become an increasing concern for farmers. Of those expecting the agricultural economy to worsen, 36 per cent cited drought as the reason, compared to just 10 per cent last quarter. Commodity prices were also a significant factor, with 37 per cent saying they were worried about falling prices.

 

However, Mr Dobbin said, the Australian dollar was playing out as less of a worry for farmers, with 34 per cent of those expecting a downturn blaming currency (compared to 64 per cent the previous quarter).

 

"This development is undoubtedly due to the comparative easing in the value of the dollar that has been experienced over the recent weeks," he said.

 

Survey respondents were also less confident about their income expectations, with 33 per cent expecting higher incomes over the next 12 months and 24 per cent anticipating lower incomes. This compared with the previous quarter where 39 per cent believed their incomes would be higher and 22 per cent lower.

 

Investment intentions - an indicator of longer-term confidence - were relatively stable, compared to the headline drop in confidence.

 

"Overall, 23 per cent of respondents expected to increase investment in their farm business over the next 12 months, down slightly from 28 per cent last quarter," Mr Dobbin said.

 

"And 13 per cent planned to invest less in their business, unchanged from the previous quarter."

 

New machinery was the most popular choice for those farmers intending to invest over the next 12 months, with 18 per cent intending to spend in this area. Livestock (14 per cent), additional land (12 per cent) and fencing (10 per cent) were also important areas for investment.

 

The latest Rabobank Rural Confidence Survey showed sentiment was generally weak across all states with confidence sharply lower in New South Wales and Tasmania.

 

Confidence had improved slightly in South Australia, but remained the lowest in the nation. In other states, sentiment was relatively stable, although at low levels.

 

Mr Dobbin said farmers are generally circumspect at this time of the year in the lead up to the winter cropping season.

 

"There is also no doubt a feeling that, following the record grain production in some states last year, it is questionable that the same level of success can be repeated in the coming year," he said.

 

The survey showed sentiment had declined sharply among livestock producers with some improvement among other sectors.

 

"The biggest fall was observed among beef producers, with lower prices and dry conditions negatively influencing sentiment," Mr Dobbin said. "Sentiment also fell among sheep farmers, with a slight fall seen among dairy farmers where confidence remains weak."

 

Cotton farmers were the most optimistic of the sectors with a significant improvement in sentiment.

 

"An increase in water stored for irrigation in northern New South Wales and Queensland should see a return to more normal levels of cotton plantings later this year, which has obviously positively impacted sentiment," he said.

 

There was also an improvement in confidence among sugar farmers on the back of higher international sugar prices and the federal government's assistance measures. However, sentiment remained lower than in all other sectors.

 

The survey also saw a decrease in the number of farmers expecting higher interest rates. Of those surveyed, 65 per cent felt that rates would increase over the next 12 months, down from 81 per cent expecting higher rates 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 2000 farmers throughout the country. The next results will be released in August 2004.

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 43 branches throughout Australia.

 

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.