13 December 2004 - 4th Quarter 2004
Results at a Glance:
- Rural confidence has eased throughout Australia.
- Sentiment is weaker in all states with the biggest falls observed in Victoria and Tasmania.
- Lower commodity prices and rising input costs are negatively influencing sentiment.
- Investment intentions are stable.
- Income expectations have declined.
- Confidence is weakest amongst grain and sheep farmers and strongest among sugar and dairy farmers.
Weakening commodity prices and rising farm costs have seen the largest fall in rural confidence in two years, according to the latest quarterly Rabobank Rural Confidence Survey.
The survey found just 20 per cent of the country's primary producers expected the agricultural economy to improve over the next 12 months, down from 28 per cent with that view in the previous quarter.
Significantly, the number of farmers with a negative outlook increased - 31 per cent expecting conditions to worsen over the next 12 months, up from 22 per cent last survey.
Rabobank head of rural banking Australia & New Zealand Neil Dobbin said a combination of weakening prices in many agricultural commodities plus rising input costs appeared to be the major factors negatively influencing farmers' confidence levels.
"A weakening in most agricultural commodity prices over the past few months has undoubtedly contributed to the fall in confidence, while increases in fuel and fertiliser prices are also taking their toll," he said.
Mr Dobbin said while the recent widespread rainfall across the south-east of Australia had been beneficial to farmers, it had come too late for many winter crops and there had been a mixed finish to the cropping season.
"Recent rain has undoubtedly provided welcome relief, however many areas still remain dry and have low levels of water storage and ground water supplies."
Of those farmers expecting the agricultural economy to worsen over the next 12 months, the survey showed 39 per cent blamed lower commodity prices and 42 per cent seasonal conditions.
Rising input costs were also shown to be having an increasingly negative impact on sentiment, with 29 per cent of primary producers now reporting they were having an adverse effect on their confidence levels, up from 18 per cent with those concerns in the previous survey. A total of 90 per cent of farmers now expect higher input costs over the next 12 months. The strong Australian dollar was also making an impression on farmers - 15 per cent nominating it as a reason to believe economic conditions were going to worsen 'on the land'.
Survey respondents were less confident about income expectations over the next 12 months, with 34 per cent expecting higher incomes over the coming year and 26 per cent anticipating lower incomes. This compared with the previous quarter where 42 per cent of primary producers believed their incomes would be higher and 19 per cent lower.
Farmer's investment intentions, however, remained relatively stable. A total of 25 per cent of respondents expected to increase investment in their farm business over the next 12 months, compared with 28 per cent last quarter. Only 13 per cent planned to invest less in their business, compared to 11 per cent the previous quarter.
Overall, 49 per cent of respondents identified seasonal conditions as the most pressing factor impacting on their farm business over the next 12 months. At the same time last year, 44 per cent of farmers believed seasonal conditions were the most pressing factor. Other important factors cited this year were rising input costs (27 per cent compared with eight per cent last year) and commodity prices (21 per cent unchanged from last year). The rising Australian dollar (three per cent down from 18 per cent) and rising interest rates (two per cent compared with three per cent) were not top of mind.
The latest Rabobank Rural Confidence Survey showed sentiment was lower across all industry sectors and states.
Confidence was lowest among grain and sheep farmers, with lower grain and wool prices a factor, Mr Dobbin said.
"Although down on last survey, sentiment is strongest among dairy and sugar producers, with higher prices helping these sectors. Dairy farmers are also being helped by the prospect of lower feed costs."
Sentiment among beef producers is also comparatively positive, with strong cattle prices and rainfall in the eastern states positively impacting on the sector.
Of the various states, confidence was weakest in South Australia and Western Australia, with low sentiment among grain and sheep producers influencing the result in those parts of the country.
Despite a fall in the last quarter, sentiment was strongest in Victoria, with relatively favourable conditions among dairy farmers underpinning confidence in that state.
The Rabobank survey also showed the majority of primary producers continued to expect higher interest rates over the next 12 months. Of those surveyed, 67 per cent felt rates would increase over the next 12 months compared with 69 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 more than 2000 farmers throughout the country. The next results will be released in March 2005.
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 is ranked one 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 46 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.