31 March 2008

Results at a glance:

• Western Australian rural confidence has risen to its highest level since 2001
• Expectations of favourable seasonal conditions – along with strengthening commodity prices – had the biggest impact on farmer confidence this quarter.
• Sentiment has increased amongst all farm types.
• Investment intentions and income expectations are also strong.

Western Australian farmer confidence has improved to its highest level since 2001.

The latest quarterly Rabobank Rural Confidence Survey – taken last month – found that WA primary producers’ confidence levels had improved over the last quarter, buoyed by strong grain prices and a return to more normal seasonal conditions.

The survey showed 46 per cent of primary producers in WA expect the agricultural economy to improve over the next 12 months, up from 42 per cent last quarter. Just 12 per cent of farmers were found to be expecting conditions to worsen, compared to 28 per cent with that expectation last quarter.

The Rabobank Rural Confidence Survey questions more than 1200 primary producers across a wide range of commodities and geographical areas throughout Australia each quarter.

Rabobank state manager for Western Australia Crawford Taylor said the positive sentiment observed in the state this survey was primarily being driven by buoyant grain prices.

“Confidence has been building since the middle of 2007, but had been tempered by the poor seasonal conditions that prevailed in the northern agricultural area last year,” he said.

“This year most areas of WA have experienced the usual dry summer, however the northern agricultural region has received between 50 and 125 millimetres of summer rainfall which will assist in providing sub-soil moisture for winter crops if the start to the season eventuates in April/May.”

The latest survey showed that grain and mixed grain/sheep producers were the most optimistic of all the agricultural sectors in Western Australia when looking at future prospects for the farm economy.

Beef and sheep farmers were the most pessimistic. This was largely in response to relatively low farm gate prices and some structural issues in these sectors, Mr Taylor said.

“We have witnessed a sell down in sheep and, to a lesser extent, cattle as cropping acres outcompete livestock acres based on the forecast of high prices for all major grain commodities,” he said. “And in medium to high rainfall areas, I think we can expect a significant increase in canola acres.”

An improvement in milk prices has encouraged dairy producers, however the grain price and other rising input costs have eroded some of the upside for farmers in the dairy sector. However, confidence is returning to dairy with industry taking a proactive stance on increasing production to meet a demand shortfall, Mr Taylor said.

Of the farmers in WA expecting the agricultural economy to improve over the next 12 months, increasing commodity prices were ‘top of mind’, cited as a reason for optimism by
46 per cent of respondents.

Global agricultural commodity prices have surged higher during the first quarter of 2008. Continuing supply concerns and strong demand have combined to lift prices for many rural
commodities to record levels. Australian rural commodity prices have risen a further nine per cent in US dollar terms since the start of 2008, with strong gains across the grains and
oilseeds, cotton and sugar sectors. However, returns for Australian producers have not matched the increases in global prices in the quarter due to exchange rate pressure caused by a strengthening Australian dollar.

Encouragingly, WA farmers’ income expectations remained strong, with 59 per cent of respondents expecting their gross farm income to improve in the next 12 months, maintaining
the high level recorded last survey when the same percentage anticipated higher incomes.

Consistent with farmers’ strong income expectations, their investment intentions had improved over the past quarter, with 40 per cent of primary producers expecting to increase
investment in their farm businesses in the next 12 months, up from 27 per cent with that intention in the previous survey.

The survey also found the issue of global warming was a concern to most farmers. Fourteen per cent of WA farmers indicated that they were ‘very concerned’ that global warming would affect the future viability of their farm business, while a further 54 per cent said they were ‘(to some degree) concerned’.

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 more than 1200 farmers throughout the country each quarter. The next results.

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 as one of the world’s safest bank by Global Finance magazine. Rabobank 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 49 locations throughout Australia.

Contact

For further information please contact Jen Reid, Public Relations (Tel: 61 2 8115-4861) or email on sydney.mediarelations@rabobank.com.