22 March 2005

Results at a Glance:

• Rural confidence in Western Australia has declined to its lowest level in four years.
• Investment intentions and income expectations have also declined.
• Sentiment has weakened sharply among grain farmers.

Rural Confidence in Western Australia has declined to its lowest level in four years, according to the latest quarterly Rabobank Rural Confidence Survey.

Only seven per cent of WA farmers expect the agricultural economy to improve in the next 12 months, down from 12 per cent in the previous quarter. And 58 per cent expect conditions to worsen over the next 12 months - up from 39 per cent last quarter.

Rabobank state manager, Crawford Taylor said the fall in grain and wool prices has dramatically impacted on farm sentiment, despite the recent rally in wheat futures prices.

"With most farmers coming off a difficult year in 2004, it has combined to make the outlook a challenging one for WA farmers," Mr Taylor said.

"However, despite the recent decline in WA farmers' confidence, the long-term outlook for WA farmers is still very positive, with on farm productivity gains for broadacre producers averaging around 3.5 per cent per annum, indicating the industry is well placed to ride through any downturn," he added.

Of the farmers surveyed, 64 per cent reported lower gross farm incomes in 2004 compared with the previous year. Only 22 per cent reported higher gross farm incomes in this period. Grain farmers were the worst affected with 81 per cent reporting lower gross farm incomes compared to the previous year.

The dry conditions experienced over summer have meant little stored moisture for the upcoming season and is making stock management difficult through lack of water. Higher fuel and fertiliser prices are also negatively impacting on sentiment.

Of the farmers expecting agricultural economic conditions to worsen in the next 12 months, 69 per cent said falling commodity prices were a major concern up from 48 per cent last quarter. Input costs are also a major concern cited by 33 per cent of respondents. Significantly, seasonal conditions were only mentioned by eight per cent of respondents compared to 21 per cent last quarter.

"Farmers are anxiously waiting for the break of season and hoping that when it does start to rain, it doesn't stop," Mr Taylor said.

The uncertain price outlook has also taken its toll on income expectations with only 26 per cent of farmers expecting higher gross farm incomes during the next 12 months. And 42 per cent are expecting lower farm incomes over this period.

The fall in rural confidence has also impacted on farmers' investment intentions, with 19 per cent intending to increase investment in their farm business over the next 12 months, compared with 25 per cent the previous quarter. Significantly, 23 per cent expect lower investment in their farm business over the next 12 months.

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 May 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.