30 May 2005
Results at a Glance:
- Rural confidence has hit a near three-year low.
- The dry conditions around much of the country are negatively influencing sentiment.
- Lower commodity prices and high input prices are also major concerns.
- Sentiment is strongest in Victoria, but is weak in all other states.
- Dairy farmers remain the most confident, in contrast to all other sectors.
- Investment intentions and income expectations have also declined.
Confidence among Australian rural producers has hit its lowest level in nearly three years, with fears the country is back in the grip of a serious drought.
The latest quarterly Rabobank Rural Confidence Survey has found that just 21 per cent of the nation's primary producers expect the agricultural economy to improve over the next 12 months, down from 28 per cent with that view in the previous quarter. The number of farmers with a negative outlook rose - 37 per cent expecting conditions to worsen over the next 12 months, compared with 28 per cent last survey.
Farmer confidence has not been recorded at such low levels since 2002, when much of the country entered a period of extensive dry conditions. And with many areas not having had consistent, satisfactory seasons since then, the prospects for a number of farmers are grim.
Rabobank head of rural banking Australia & New Zealand Neil Dobbin said dry conditions around much of Australia have severely damaged prospects for the winter grain crop and have resulted in virtually no pasture growth.
"Many parts of rural Australia are doing it really tough," he said. "The lack of rainfall has meant no start to the winter cropping season in virtually all of Australia with the exception of Western Australia.
"The agricultural sector is on a 'knife's edge', with good rains desperately needed in the next few weeks if we are to have a chance of a reasonable winter crop
"Given these conditions, it is hardly surprising that most farmers around the country are so disheartened."
Mr Dobbin said the dry conditions meant many livestock producers were also being forced to rely on supplementary feeding of their stock.
The latest Rabobank Rural Confidence Survey found that, in addition to the poor seasonal outlook, lower commodity prices and higher input prices were also taking their toll on farmer sentiment.
Of those farmers expecting the agricultural economy to worsen over the next 12 months, 44 per cent cited seasonal conditions as the reason compared with 15 per cent last quarter.
Commodity prices also rated as a significant concern for farmers surveyed - 43 per cent nominated these as a reason for conditions worsening (down from 60 per cent with this concern last quarter).
Higher input costs also remained a worry, with 89 per cent of farmers surveyed expecting input prices to rise over the next 12 months. Of those farmers expecting the agricultural economy to worsen in the coming year, 31 per cent nominated higher input costs as a contributing factor (up from 24 per cent last quarter).
In line with decreasing confidence levels, farmers' income expectations also declined in the last quarter. A total of 37 per cent expected to have higher incomes over the next 12 months, down from 44 per cent with that expectation last quarter.
Investment intentions were also down. A total of 24 per cent of respondents expected to increase investment in their farm business over the next 12 months, compared with 29 per cent last quarter. However, only 14 per cent of farmers planned to invest less in their business (compared with 13 per cent last quarter).
Of the different sectors, the latest Rabobank Rural Confidence Survey showed sentiment was strongest among dairy farmers (despite a slight fall in their confidence in the last quarter). Confidence remains weak in the other sectors with sharp falls observed among livestock producers and sugar cane farmers.
Of the states, the survey showed confidence remained strongest in Victoria, despite a fall observed in the last quarter. Sentiment is underpinned in Victoria by the state's strong dairy sector, with confidence weak among other farm types in the state. Confidence was weak in other states with sharp falls observed in New South Wales, Queensland and Tasmania.
The majority of respondents expected interest rates to continue to rise over the next 12 months. Of those surveyed, 78 per cent felt interest rates would increase over the next 12 months, compared with 74 per cent who had that expectation last quarter. The prospect of higher interest rates continues to not appear a significant concern to farmers, with only five per cent citing rising rates as a reason agricultural conditions will worsen 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 August 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.