28 November, 2007

Results at a Glance:

• Despite weakening this quarter, rural confidence has remained at a positive level – with more farmers expecting conditions to improve than those expecting conditions to deteriorate.
• Seasonal conditions continue to have the biggest impact on confidence with the rising Australian dollar also a factor.
• Investment intentions and income expectations have also decreased.
  

Rural confidence has deteriorated in Tasmania, as persistent dry conditions in the southern and central areas of the state constrain optimism, the latest quarterly Rabobank Rural Confidence Survey shows.

Overall, the Rabobank Rural Confidence Survey – which surveys an average of 2000 primary producers across a wide range of commodities and geographical areas throughout Australia each quarter – shows that 39 per cent of primary producers in Tasmania expect the agricultural economy to improve over the next 12 months, down from 52 per cent last quarter.

The latest survey - taken last month - has found that significantly more respondents expect conditions to worsen over the next 12 months – 28 per cent compared to 19 per cent last quarter.

Rabobank senior manager for Launceston, Greg Bott, said that the northern agricultural regions had benefited from favourable rains in the last quarter, which had relieved some of the distress caused by prolonged dry conditions. However, he said that southern and central regions had not been as fortunate.

“If it had not been for a buoyant dairy industry, the state’s weakened confidence result may have been much worse.

“The major positive impact on rural confidence has been the substantial increase in opening milk prices, which has buoyed the sector considerably. There is now significant interest in dairy investment by local dairy farmers and other farmers looking to convert.

Evidence of new dairy shed construction is a positive sign for the industry,” Mr Bott said.

Mr Bott also noted that sector results closely reflect his observations in the field, with horticulture and cropping travelling well, and grazing a little flat. He added that grain growers have been encouraged by strong commodity prices of late.

Global rural commodity prices have continued to strengthen in recent months as world supply shortages and robust demand conditions have created a bullish environment in many markets. In US dollar terms, Australian rural commodity prices have reflected these world conditions by reaching record levels in October, having increased by 29 per cent since the start of 2007. Unfortunately for Australian producers recent global commodity price increases have been largely offset by a weakening of the US dollar versus the Australian dollar, resulting in $A returns actually falling slightly in October. That said, prices in $A terms have still increased by 13 per cent since the start of the season.

World dairy and grain prices have continued to outperform other sectors.

Of the farmers in Tasmania who had been expecting the agricultural economy to improve in the next 12 months, 70 per cent cited seasonal conditions as a major reason, up from 55 per cent last quarter. Rising commodity prices were also “top of mind,” mentioned by 24 per cent of respondents.

Consistent with the decrease in headline confidence, the survey showed Tasmanian farmers’ income expectations also decreased, with 34 per cent of respondents expecting their gross farm income to improve in the next 12 months, down from the previous quarter when 53 per cent anticipated higher incomes.

Similarly, investment intentions also weakened in the latest survey period, with 20 per cent of respondents expecting to increase investment in their farm businesses in the next 12 months, down from 32 per cent in the previous quarter.

The survey also found that, of the 65 per cent of Tasmanian farmers who required additional labour over the last 12 months, 67 per cent indicated that they had experienced some difficulty in attracting adequate labour. When asked what steps had been taken to overcome labour shortage, 61 per cent indicated that they had increased their own working hours, whilst 36 per cent had asked family and friends for assistance, five per cent had been forced to pay more for labour.

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 an average of 2000 farmers throughout the country each quarter. The next results will be released in March 2008.

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.