5 September 2005

Results at a Glance:

 

• Rural confidence has rebounded sharply to its highest level in more than two years.
• Sentiment improved in all states and remains strongest in Victoria.
• Confidence improved among all farm types with the exception of cotton.
• Lower grain, wool and cotton prices continue to negatively influence sentiment.
• Investment intentions have improved to their highest level in nearly four years.
• Income expectations have also improved.

 

Rural confidence has rebounded sharply, with Australia's farmers the most confident they have been in more than two years.

 

The latest quarterly Rabobank Rural Confidence Survey has found 39 per cent of the nation's primary producers now expect the agricultural economy to improve over the next 12 months, up from 21 per cent with that view in the previous quarter. And fewer farmers expect conditions to worsen over the coming year - just 16 per cent, down from 37 per cent last quarter.

 

This is the largest quarter-on-quarter increase in confidence observed in the survey's five year history.

 

Rabobank head of rural banking Australia & New Zealand Neil Dobbin said widespread rainfall around much of the nation in June and July could be credited for the dramatic lift in farmers' spirits.

 

"This rain has revived the fortunes of many of the country's primary producers," he said.

 

"It is likely we will now see a wheat crop of 22 to 23 million tonnes, up from earlier estimates of 16 to 18 million tonnes. Prospects have also improved for livestock producers with the potential for good pasture growth in spring following good winter rains in most areas."

 

However, Mr Dobbin cautioned that many areas of rural Australia still needed significant further rainfall in spring to finish crops and ensure adequate pasture growth.

 

Despite the improvement in confidence, Mr Dobbin said, lower price outlooks for wheat, canola, cotton and wool were negatively influencing rural sentiment.

 

Of those farmers expecting the agricultural economy to worsen over the next 12 months, 46 per cent cited falling commodity prices as the reason (up from 43 per cent with that concern in the previous survey).

 

Higher input costs continue to plague producers with 36 per cent nominating these as a concern, up from 31 per cent last quarter.

 

Significantly, the number of respondents concerned seasonal conditions would have an adverse effect on the agricultural economy over the next 12 months declined to 22 per cent, compared with 44 per cent last survey.

 

Farmers' investment intentions are also at their highest levels in nearly four years, with 33 per cent of respondents expecting to increase investment in their farm business over the next 12 months, compared with 24 per cent last quarter. Fewer farmers expected to invest less in their business - 11 per cent compared with 14 per cent last quarter.

 

Mr Dobbin said the high investment intentions indicated a solid level of underlying confidence in the sector.

 

Income expectations have also hit their highest level in four years. A total of 49 per cent of primary producers expect to have higher incomes over the next 12 months, up from 37 per cent with that expectation in the previous survey.

 

Of the different commodities, the latest Rabobank Rural Confidence Survey showed sentiment was stronger across all industries with the exception of cotton.

 

Confidence continues to be strongest among dairy farmers with robust international prices and favourable seasonal conditions in many of the dairy regions underpinning sentiment in the sector.

 

Confidence is also strong among beef and sugar producers with these sectors recording sharp improvements in sentiment in the last quarter.

 

Mr Dobbin said the continued strength in international sugar prices was continuing to have a positive impact on sentiment among sugar growers.

 

However, he said, confidence remained weak among cotton farmers with the poor international price outlook and the prospect of low water allocations for the 2005/06 season adversely impacting sentiment.

 

Farmers' confidence improved in all states and remains strongest in Victoria, with the state's dairy farmers underpinning positive sentiment.

 

"Conditions have also improved in other farm types in Victoria," Mr Dobbin said.

 

Confidence is weakest in Western Australia, where the uncertain price outlook for wool and grain is adversely affecting confidence.

 

The survey showed the majority of farmers now expect a stable interest rate environment over the next 12 months. Of those surveyed, 54 per cent expected no change in rates over the next 12 months, up from 18 per cent with that view the previous 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 November 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.