Results from Rabobank’s Rural Confidence Survey, released today, show rural communities’ confidence in the agriculture sector at a 12-year high.
This lift in rural confidence is due to the arrival of much-needed rain falling in some drought-affected areas and farmers are feeling more prepared for drought conditions now more than ever.
A total of 94 per cent of surveyed farming businesses indicated some level of preparedness for drought, with more than 50 per cent reporting they are more prepared now than five years ago.
“Producers have become more proactive, rather than reactive, in the way they manage drought,” Rabobank Australia CEO Peter Knoblanche said.
“But even the best strategies become harder to execute the more prolonged, and severe, the drought is and there are parts of Queensland and New South Wales that have been facing adverse seasons for a number of years now.”
Despite this positive outlook, the survey found that 40 per cent of the nation’s farmers continued to hold a pessimistic outlook for the year ahead, with drought the primary concern.
The recent rainfall having come too late to bolster winter crop prospects and with follow-up rain needed to break the drought.
However, the outlook was vastly different story in the west of the country, as Western Australian farmers look to reap half of the nation’s winter crop.
Income projections in Western Australia outstripped the rest of the country, with close to half (48 per cent) expecting an increase in incomes in the coming year.
“This positive outlook is in stark contrast to many other regions in Australia, as WA farmers are able to take advantage of the rise in domestic grain prices driven by the tight supplies in the east,” Mr Knoblanche said.
According to the Survey, confidence was also up across the board – although remained subdued – in all sectors except dairy, which posted a small decline with 55 per cent of the nation’s dairy farmers expecting conditions to deteriorate over the coming year.
Mr Knoblanche said high operational costs had made it “a really challenging year for many in the dairy sector”, as the cost of feed and water is putting considerable pressure on margins.
The biggest turnaround in sentiment was seen in cotton, with confidence improving strongly along with the market outlook.
“With domestic prices trading above $600 a bale, any growers who have the water to plant will have done so, but production is expected to be curtailed by the dry conditions – in the vicinity of 50 per cent lower than last year,” Mr Knoblanche said.
Grain grower confidence also lifted, with 34 per cent having an optimistic view on the 12 months ahead – largely underpinned by WA producers.
“With the country expected to harvest its smallest winter crop in 10 years, domestic grain prices are likely to remain elevated well into 2019 and this is boding well for those who have been able to get a crop off,” Mr Knoblanche said.
While beef and sheep sentiment also improved, seasonal concerns continued to be ‘front of mind’ as feed costs remain high and graziers face decisions around continuing to feed stock or to further de-stock.
“The decisions facing graziers are becoming tougher to make, with many already making the easier ones of selling old or young stock, and now being faced with decisions around their breeding animals,” Mr Knoblanche said.
While confidence in the sugar industry trailed the other commodities – to be on par with dairy – it was well up on where it has been for much of the past year with the outlook for sugar prices improving in recent weeks.
The Rabobank Rural Confidence Survey questions an average of 1000 primary producers across a wide range of commodities and geographical areas throughout Australia on a quarterly basis.
The most robust study of its type in Australia, the survey has been conducted by an independent research organisation interviewing farmers throughout the country each quarter since 2000. The next results are scheduled for release in March 2019.
For more information visit Rabobank online.