Farmer confidence strengthens in North Queensland

1 December 2008

Results at a Glance:

• Consistent with the overall result in Queensland, rural confidence has improved in North Queensland in the last quarter, however still remains at a negative level.
• The decreasing Australian dollar, and its impact on commodity prices, is having the biggest positive impact on farm confidence.
• North Queensland agricultural producers were mostly of the opinion that they had yet to be impacted by the global credit crisis - 63 per cent of producers indicated 'no impact as yet'.

Farmer confidence in North Queensland has steadied after recent declines however remains among the weakest in the nation, according to the results of the latest Rabobank Rural Confidence Survey

The latest survey – taken approximately one month ago – found 25 per cent of North Queensland’s primary producers expect the agricultural economy to improve over the next 12 months, up from 17 per cent with that view in the previous quarter.

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.

Rabobank regional manager North Queensland, Peter Ciranni, said the results of the latest survey were not surprising as seasonal conditions have been generally favourable and the falling Australian dollar has helped to balance drops in international prices for key commodities.

“Due to the importance of international markets to primary producers in North Queensland, a weak Australian dollar will always boost confidence,” he said.

“We have witnessed renewed interest from Asian buyers for beef which has seen prices for live trade cattle reach $1.80 per kilo ex-Townsville port. Unfortunately prices for cattle destined for local meat works are depressed, with little likelihood of that changing in the short term.”

Mr Ciranni said cane prices are improving but are yet to reach a level that will relieve the stress felt by many producers. “Forecasts suggest that the next couple of years should see a return to higher prices for cane, however world prices are yet to reach a level that will encourage local producers. We have been very fortunate that the Australian dollar depreciated when, and to the extent, that it did.”

Of those North Queensland farmers who expect conditions to worsen over the next 12 months, 58 per cent cited input prices as a major contributing factor, in line with the result recorded last quarter.

Mr Ciranni noted that while prices for oil based products had softened, the price for key inputs such as fertiliser remained high.

“It can take some time for local suppliers to source fertiliser and chemicals, which, when local demand is strong, can result in inflated prices.” he said. “Additionally, high priced inventories still carried by many suppliers are also responsible for the lag between falls in international and domestic prices.”

In addition to concerns regarding input prices, commodity prices are also a concern for many producers.

Recent global financial market turmoil has had a significant impact on most agricultural commodity markets, fuelling unprecedented levels of price volatility. The price weakness seen in recent months has continued throughout October and early November with fears of a protracted global economic downturn weakening demand and price expectations for the coming year, particularly in developing nations. Australia's major agricultural commodity prices – as indicated by the Reserve Bank of Australia's Rural Commodity Index – had fallen 29 per cent in October, in US dollar terms, from a record high reached in March this year. However, Australian primary producers have been somewhat protected from the downturn in world prices by a weaker domestic currency, with the same index in Australian dollar terms falling by only five per cent over the March to October period.

Consistent with the increase in headline confidence, income expectations have also increased in the last survey period. Overall, 41 per cent of respondents expect their gross farm income to improve in the next 12 months, compared to 32 per cent who anticipated higher incomes last quarter.

Investment intentions have also improved with 32 per cent of respondents expected increase their level of investment over the next 12 months, compared to 25 percent previously.

The latest Rabobank Rural Confidence Survey also found that North Queensland agricultural producers were largely of the opinion that they had yet to be impacted by the global credit crisis.

When asked, ‘How has the global credit crisis currently affecting the global financial sector impacted on your business?’, 63 per cent of producers responded ‘No impact as yet’. Common impacts listed by producers included; ‘more difficult economic conditions’, ‘lower commodity prices’ and ‘increased input costs’.

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 March 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 has a AAA credit rating and is ranked one of the world’s safest banks by Global Finance magazine. The bank operates in 43 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 50 locations throughout Australia.

Contact

To arrange an interview with Rabobank regional manager for North Queensland, Peter Ciranni, or for more information on Rabobank’s Rural Confidence Survey, please contact:

Gen McAulay, Queensland Marketing Manager
Phone: 07 3115 1812 or 0428 279 576
Email: Gen.McAulay@rabobank.com
or
Elise MacDonald, Public Relations Consultant
Phone: 02 8115 4861
Email: Elise.MacDonald@rabobank.com

back to to