The research showed rural confidence eased back from the highs seen at the end of 2016, strong market fundamentals for most commodities continued to underpin a largely positive outlook prevailing among the nation’s farmers.
By sector, sheep graziers were the most bullish about their prospects, with sentiment rising further with a recent upswing in wool prices. Dairy farmers posted the largest turnaround in confidence, to levels last seen in mid-2014, as farmgate margins look set to improve throughout the year.
However, the survey reported some uncertainty in the medium-term outlook, with almost a third of farmers reporting concern the new US administration may negatively impact Australian agriculture.
As the first gauge of rural confidence for 2017, the survey found that while the net confidence indicator eased this quarter, the majority of farmers expect the agricultural economy to remain stable. A total of 59 per cent expected the agricultural economy to perform at similar levels to last year in the 12 months ahead.
While the percentage of farmers expecting the agricultural economy to improve in the next 12 months dipped to 25 per cent (from 36 per cent last quarter), fewer farmers also reported having a negative view – with 12 per cent expecting conditions in the agricultural economy to worsen (compared with 15 per cent previously).
Rabobank national manager Country Banking Australia Todd Charteris said while the hot summer in eastern Australia had driven the pull-back in confidence, the nation’s farmers were poised for a good year, with the farmgate prices of most livestock and crops expected to come in above their five-year average in 2017. This was reflected in the survey results, with 74 per cent of those expecting conditions to improve citing the commodity price outlook as reason for their optimism.
“The stars have really aligned for those in the livestock industry – and have for some time now – with sheep and cattle still fetching strong prices in the saleyards, while many entered summer with a good availability of feed and water,” he said. “Wool prices have also risen strongly in recent months, particularly at the finer-end of the market, which has seen some renewed confidence in the industry.”
Charteris said the large turnaround in confidence posted by dairy farmers this quarter had been driven by the improved expectations for the sector.
“Farmgate prices for southern export-orientated dairy farmers are expected to increase in 2017/18, while producers in the fresh milk market are anticipating prices to remain stable at relatively elevated levels,” he further said.
With cotton and sugar markets also expected to remain relatively well-supported by global fundamentals, Charteris said, grains and oilseeds were proving to be the exception, particularly wheat.
“The wheat market continues to face strong headwinds, with the sheer abundance of wheat on the global market expected to mute potential price improvement this year,” he said.
Reflecting the hot summer across much of south-east Australia, seasonal conditions were less of a positive driver of sentiment among farmers this quarter – nominated as reason for optimism by 31 per cent of those expecting conditions to improve, down from 68 per cent last survey.
“Much of New South Wales, southern Queensland, South Australia and parts of northern Victoria sweltered through one of their hottest – and in some areas hottest – summers on record,” Charteris said.
“And this particularly took its toll on the cotton sector, with the hot weather impacting dryland cotton yields.”
In the west of the country “it is a different story however”, Charteris said, with wet conditions across much of WA’s agricultural region during February providing significant stored moisture for the state’s 2017 grains crop.
While the Rabobank survey found Australian farmers to be generally positive about the outlook for 2017, the results highlighted some uncertainty stemming from the recent change in US government. A total of 30 per cent of farmers surveyed reported having concerns the new Trump administration may have a negative impact on Australian agriculture, particularly on trade relations with the US.
“Although it is too early to assess the impact of the Trump presidency on Australia’s agri sector, it is clear the administration change in the US is providing some uncertainty in the near-term and potentially some turbulence in the medium-term on economic and regulatory fronts,” Charteris said.
While the overall net rural confidence reading eased back this quarter, Australian farmers overall retained a positive outlook for their gross farm incomes. A total of 32 per cent reported that they expect an improved financial result this year, while a further 50 per cent expect similar incomes to 2016.
Reflecting ongoing longer-term confidence in the agri sector, investment intentions rose to a two-year high, with 27 per cent of the nation’s farmers looking to increase their farm business investment, up from 23 per cent previously. While a further 66 per cent were intending to maintain their investment in-line with last year.
Investment in on-farm infrastructure remained a key priority, while farmers were also looking to upgrade plant and machinery, increase their livestock numbers and invest in new technologies.
Rabobank Rural Confidence Survey questioned an average of 1,000 primary producers across a wide range of commodities and geographical areas throughout Australia on a quarterly basis. 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 June 2017.