27 August , 2007

Results at a Glance:

• Rural confidence has rebounded strongly in New South Wales to very high levels.
• Sentiment has increased among all farm types.
• Strengthening commodity prices – along with an expectation of more favourable seasonal conditions – had the biggest impact on farmer confidence this quarter .
• Investment intentions and income expectations have also increased.
  

Rural confidence in New South Wales has rebounded dramatically as promising winter rainfall and record commodity prices fuel farmer optimism, according to the latest quarterly Rabobank Rural Confidence Survey.

The increase has seen farmerconfidence hit levels not seen since 2001, however it is expected that sentiment will quickly deteriorate if further rain is not forthcoming over the next few weeks.

Overall, the Rabobank Rural Confidence Survey – which surveys more than 2000 primary producers across a wide range of commodities and geographical areas throughout Australia – shows 62 per cent of primary producers in NSW expect the agricultural economy to improve over the next 12 months, up from 30 per cent last quarter.

The latest survey, taken in June and July this year, has found that significantly less respondents expect conditions to worsen over the next 12 months – 13 per cent compared to 36 per cent last quarter.

Rabobank state manager Northern NSW, Graham Yeo, said that the marked improvement in NSW confidence levels was not surprising given the low base last quarter and encouraging rainfall during May and June.

However, Mr Yeo warned that follow-up rain would be necessary to significantly impact on longer term confidence levels.

“Rainfall around much of the state since July has been patchy at best. In the north of the state, a lack of follow up rain off the back of a late plant of winter crops on low moisture has seriously threatened their survival, particularly in the western part of the region,” he said.

Mr Yeo noted that conditions in the south of the state were similar, with a dry July seeing many croppers and graziers nervous and hoping for rain over the coming weeks.

“Conditions in the south of the state had been favourable through May and June , with a return to what would be considered average rainfall, however as is often the case, more is needed to maintain good crop yields and avoid forced livestock sales,” Mr Yeo said.

Whilst most producers have benefited from the rains to date, low levels of irrigation water will continue to have an adverse impact on cotton producers. Persistently low dam levels and water allocations will result in minimal summer cotton plantings unless above average rain is received in the catchments areas in the short term.

Of those farmers surveyed who expect conditions to improve over the next 12 months, 83 per cent cited seasonal conditions as a major contributing factor. Increasing commodity prices were also “top of mind”, mentioned by 24 per cent of respondents.

Rural commodity prices have rebounded over the past quarter, buoyed by record high global wheat and dairy prices. In US dollar terms, Australian commodity prices reached record levels in July, despite relatively weak sugar prices and easing cattle prices. A significant decrease in the Australian dollar in early August from recent 15-year highs will provide additional support to Australian rural commodity exporters. Of note, concerns over the Australian dollar were a major driver of negative sentiment amongst the 13 per cent of New South Wales producers expecting conditions to worsen over the next 12 months (cited by 42 per cent of these respondents).

Investment intentions also increased in the last survey period with 36 per cent of primary producers expecting to increase investment in their farm businesses in the next 12 months, up from 22 per cent in the last quarter. Conversely, the number of farmers expecting their investment to decline over the next 12 months decreased to 6 per cent, compared to 16 per cent last quarter.

Consistent with the increase in headline confidence, income expectations rebounded sharply in the last survey period. Overall 56 per cent of respondents expect their gross farm income to improve in the next 12 months, up from last quarter when 29 per cent anticipated higher incomes. The proportion of producers expecting their farm income to decline over the next 12 months fell to just 16 per cent, compared to 30 per cent last quarter.

The quarterly Rabobank Rural Confidence Survey is a definitive monitor of outlook and sentiment in Australian rural industries. The most robust study of its type in Australia, the survey has been conducted since 2000 by an independent research organisation interviewing a panel of more than 2000 farmers throughout the country each quarter. The next results will be released in November 2007.

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 banks by Global Finance magazine. The bank operates in 42 countries, servicing the needs of more than nine million clients worldwide through a network of more than 1500 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 47 branch locations 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.