Farmer mood up slightly, but tough season weighs on 2019

Farmer mood edges up, but drought weighs on 2019 outlook


Agribusiness
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Ag sentiment rises marginally and investment plans stay strong, but more farmers are negative than positive

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The lack of much needed drought-breaking rain in eastern and southern Australia continues taking its toll on farm sector sentiment, although farmer confidence has recovered marginally higher in the past quarter.

Rabobank’s first rural confidence survey for 2019 showed while overall farmer sentiment in the nation had risen marginally in the past quarter, more farmers are negative than positive about the year ahead.

Sentiment has plunged in Queensland as northern cattle producers come to terms with the devastation of recent flooding.

However West Australian and and South Australia producers were more optimistic than their counterparts further east, reporting a higher level of confidence as they looked forward to a good autumn break.

While it will be hard for the coming season to match up, the 2018 WA harvest has helped set many up for this year, and the years ahead. - Peter Knoblanche, Rabobank

Rabobank Australia chief executive officer, Peter Knoblanche, described the start to the year as very difficult for many, as drought, bushfires and floods left their mark.

The country had endured its warmest summer on record and was heading into an autumn period with a “very uncertain” seasonal outlook.

A good autumn break in the next month would be critical to let farmers to get crops in on moisture and give graziers some relief from feeding stock.

“Significant rain is also needed to boost irrigation storages, which remain low in all major systems in south-eastern Australia,” he said.

Mr Knoblanche said commodity prices, thankfully, remained strong.

“Positive developments like improved access to overseas markets, such as the recent trade deal with Indonesia, and increased investment in agriculture are also helping to underpin longer-term positivity in the sector,” he said.

The latest quarterly survey of 1000 farmers found 33 per cent of expected conditions in the agricultural economy would get worse this year.

That’s actually a slight improvement on the 40pc with that view late last year.

Drought remained the primary driver of pessimistic sentiment at a national level, cited by 82pc.

Farmers anticipating a better year have also declined in number to 22pc (from 26pc in December), while 39pc felt the agricultural economy would remain stable.

Investment plans hold solid

However, on-farm investment intentions remained relatively strong across Australia, with nearly two-thirds of surveyed producers set to maintain their current level of farm business investment in 2019.

About 19pc intended to increase investment.

WA and Tasmanian farmers had a particularly strong investment appetite, with 34pc (almost double the national average) looking to lift investment over the coming year.

In contrast, 25pc in NSW and 21pc in Queensland were winding back investment as seasonal challenges continued.

Farmer confidence remains highest in WA after grain growers finished one of the most profitable years ever experienced.

“While it will be hard for the coming season to match up, it has helped set many up for this year, and the years ahead,” Mr Knoblanche said.

Strong grain prices helped keep sentiment strong in SA, too, while Victorian farmer confidence has edged up, mostly in anticipation of a positive autumn break.

Australian farmers are very proficient at managing the weather’s vagaries, however natural disasters like the recent Queensland floods are something else entirely - Peter Knoblanche

However, for North Queensland cattle producers who had endured years of drought and fought to keep their stock alive, Mr Knoblanche said it was nothing short of devastating to see the losses caused by last month’s floodwaters.

“While stock losses are yet to be determined, some graziers in the region have lost half, to nearly all of their cattle, making it a very long road to recovery,” he said.

“Australian farmers are very proficient at managing the weather’s vagaries, however natural disasters like the recent Queensland floods are something else entirely, and nobody can adequately prepare for these extremes.

Qld mood leads fall

Queensland generally showed the biggest slide in farmer confidence in the survey, while NSW sentiment remained relatively subdued.

Southern Queensland’s hot and dry summer had curtailed crop yields, particularly in the South West and Darling Downs.

In SA, Victoria and NSW – where last year’s winter crops were all below average and it remains dry in many regions – farmers were looking for a “decent autumn” to set them up for the year ahead, Mr Knoblanche said.

“It is perhaps the most anticipated autumn break in a long time, coming off the back of a dry year, and in some areas, a consecutive run of dry years,” he said.

“Farmers are ready to jump into their cropping programs with confidence if the season allows, although it will take time to ease the input cost pressures for those feeding livestock and to rebuild herds.”

Meanwhile in Tasmania, confidence remained relatively sound despite the bushfires, which have impacted grazing country in the Highlands and may have tainted wine grapes with smoke in the Huon Valley and Channel region.

Overall 34pc of farmers expected a weaker financial result this year, which was fewer than last quarter’s 42pc, but those expecting incomes to improve were down slightly from 24pc to 21pc.

WA and SA led the positive mood on income projections.

Grain price hopes

With local grain stocks at a 10-year low, confidence in the grain sector is being underpinned by expectations of domestic values staying above average into 2020

Confidence was also comparatively strong among sheep graziers, with 50 per cent expecting a similar year to the last, and a further 22 per cent expecting conditions to improve.

“While the high feed costs have taken some of the shine off, lamb and wool prices remain at historically high levels,” Mr Knoblanche said.

“But graziers will be hoping for a good autumn to reduce their feeding requirements, which not only takes its toll financially but also emotionally, as farmers are out there feeding their stock day-in, day-out.”

Confidence in cotton, sugar and dairy lagged the other commodity sectors.

In dairy, substantial cost pressures continued to create significant headwinds for farmers.

“Feed costs are now double where they were a year ago and, for irrigators, the cost of temporary water has trebled,” Mr Knoblanche said.

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The story Farmer mood up slightly, but tough season weighs on 2019 first appeared on Farm Online.

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