Results at a glance:
- NSW rural confidence has eased further, following successive falls over the past three quarters.
Concerns about international markets – along with falling commodity prices – had the biggest impact on confidence levels.
NSW farmer sentiment is strongest amongst the state’s grain and cotton growers in the northern regions of the state.
New South Wales rural confidence levels have fallen again this quarter as difficult global market conditions and softening commodity prices continue to impact the state’s farmers, according to the latest Rabobank Rural Confidence Survey.
Although farmer confidence has fallen overall, it varies greatly throughout the state. Sentiment has improved for northern grain and cotton producers while in the south, particularly the Riverina and Monaro regions, confidence levels have dropped significantly.
A comprehensive monitor of outlook and sentiment in Australian rural industries, the Rabobank Rural Confidence Survey questions an average of 1200 farmers across a wide range of commodities and geographical areas throughout Australia on a quarterly basis.
The latest survey – taken approximately one month ago – found that an increasing number of the state‟s farmers were expecting the agricultural economy to worsen over the next 12 months. A total of 43 per cent of NSW primary producers expected the agricultural economy to deteriorate, up significantly on the 34 per cent recorded last quarter.
Only 16 per cent of NSW farmers said that they expected the agricultural economy to improve over the next 12 months, a large drop compared to the 31 per cent in the previous quarter.
Rabobank state manager northern NSW, Graham Yeo, said that the negative result was driven by those farmers operating in the south of the state and pockets of grain producers in the north who were adversely affected by heavy rains over the summer.
"Heavy rain fell in late November throughout the northern half of the state which had a detrimental effect on crop harvesting, but conversely it also provided considerable soil moisture that had been lacking for quite some time," he said. "Sentiment amongst the worst affected grain producers has understandably been impacted. However substantial falls during February have paved the way for a strong cropping year. Most farmers undertake minimum till practices and the soil moisture levels should be maintained and potentially only require minimum in-crop falls to support the crop this year.
"The southern half of the state has not been as fortunate and throughout summer most areas have experienced record high temps combined with dry conditions. It is this part of the state that is best known for its traditional „autumn breaks‟ and most producers are keeping their hopes up that it will arrive in the next couple of months to provide the moisture required for the 2009 season."
Mr Yeo said the rain in the north of the state, and in Queensland, had provided a major boost for cotton producers in that region who should not suffer any irrigation shortage given the small planting area this season. The water situation for cotton producers further south is not as positive.
"The major dams in the south have not received the rain that fell further north. „General security‟ allocations for the 2008/09 season were modest, averaging approximately 10 per cent. „High security‟ allocations were much greater, in the 30 to 90 per cent range, and have provided considerable support for permanent plantings such as grapes. It is the annual crops, predominantly cotton and rice, that are once again significantly impacted by the dry conditions," he said.
The latest survey showed that of those NSW farmers who expected conditions to improve over the next 12 months, 55 per cent cited „an expectation of more favourable seasonal conditions‟ as the main reason.
Of those who expected conditions to decline, 65 per cent nominated 'overseas markets / economies' as a major contributing factor, up from 32 per cent with that view in the previous quarter. Falling commodity prices were also „top of mind‟, cited by 29 per cent of farmers.
The deceleration of the global economy has continued to impact agricultural commodity markets in recent months, with weakened end demand particularly for more discretionary agricultural products. Supply has either been buoyant or has been slow to adjust to weakened demand. This has seen downward pressure on agricultural commodity prices and enhanced market volatility. International grain, dairy and cotton prices in February fell to their lowest level in two months – some 50 to 60 per cent lower than year-earlier prices. Locally however, Australian producers have continued to experience some relief from these price falls courtesy of a weaker domestic currency. The Reserve Bank of Australia‟s Rural Commodity Index shows Australia‟s major agricultural commodity prices fell 34 per cent in February since the record highs set in March last year in US dollar terms, but just seven per cent in Australian dollar terms – still historically strong price levels.
Reflecting the recent drop in fertiliser, chemical and fuel prices, only 14 per cent of farmers cited rising input prices as a concern, down from 32 per cent last quarter and 74 per cent the quarter prior.
Consistent with the decline in the overall confidence measure, investment intentions also weakened, with 18 per cent of NSW respondents expecting to increase investment in their farm businesses in the next 12 months, down from 25 per cent in the previous quarter.
Overall, 23 per cent of respondents expected their farm business performance to improve over the next 12 months.
"This was down on the previous quarter, however significantly better than farmers‟ perception of the overall agricultural economy," Mr Yeo said. "The variance between these two measures tends to indicate an underlying confidence, as New South Wales farmers feel more positive about their situation than that of the agricultural economy as a whole."
NSW farmers reported generally higher incomes over the previous three months, with 41 per cent receiving higher incomes than during the same period the previous year and only 23 per cent lower.
The most robust study of its type in Australia, the Rabobank Rural Confidence Survey has been conducted since 2000 by an independent research organisation interviewing an average of 1200 farmers throughout the country each quarter.
The next results are scheduled for release in May 2009.
Rabobank Australia is a part of the international Rabobank Group, the world’s leading specialist in food and agribusiness banking. Rabobank has more than 110 years’ experience providing customised banking and finance solutions to businesses involved in all aspects of food and agribusiness. Rabobank is structured as a cooperative and has a AAA credit rating from Moody’s and Standard & Poor's. Rabobank operates in 43 countries, servicing the needs of more than nine million clients worldwide through a network of more than 1600 offices and branches. Rabobank Australia is one of the country'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 51 branches throughout Australia.
To arrange an interview with Rabobank state manager Northern NSW Graham Yeo or for more information on Rabobank‟s Rural Confidence Survey, please contact:
Denise Shaw, Public Relations Manager
Rabobank Australia & New Zealand
Phone: 02 8115 2744 or 0439 603 525
Email:denise.shaw@rabobank.com
or
Kelly Lund, Public Relations
Rabobank Australia & New Zealand
Phone: 02 8115 4861
Email:kelly.lund@rabobank.com