Sheep meat

Difficult season dragging sheep producer confidence down across eastern states

Sheep Central, December 1, 2014

windmill weather 1Difficult seasonal conditions have dragged down sheep producers’ confidence, according to the latest Rabobank Rural Confidence Survey.

About 34 percent of the sheep graziers questioned for the latest survey reported a negative outlook –up from 14 percent previously — while 14pc held an optimistic view — down from 35pc.

Rabobank group executive for Country Banking Australia Peter Knoblanche said the fundamentals for sheepmeat are generally on the positive side, with lamb and mutton prices continuing to track higher than previous years for this time of the year, and an improved export picture around the Middle East, US and China.

“However, with poorer climatic conditions gripping much of the north-west of New South Wales, western Victoria and into South Australia, many graziers are doing it tough in terms of feed and stock water.

“If they catch a break in seasonal conditions we may well see a rebound in confidence,” he said.

SA and WA farmers are big smartphone users

In a new question added to this survey, more than one third (36pc) of the nation’s farmers reported using a smartphone or tablet to access the internet in the operation of their business. While half (56pc) said they did not. The remainder did not record a result.

Farmers in South Australia (48pc) and Western Australia (49pc) reported the highest usage of the technology.

Overall farmer confidence lower

Rabobank suggested that Australian farmer confidence has dipped into overall negative territory with more of the country’s farmers reporting a pessimistic view on the future agricultural economy than those with an optimistic outlook.

Significant falls in confidence among farmers in Victoria and South Australia, due to below-average rainfall in recent months, contributed most to reduced national rural confidence.

Western Australian farmers surveyed continued to lead the country as the most optimistic, while participating South Australian producers reported the lowest confidence levels.

Falling commodity prices at the time of the survey, particularly for dairy and grains, were other key drivers behind lower sentiment. Beef producers surveyed reported stronger confidence levels, largely driven by robust prices and positive news in overseas markets.

The focus on food and agriculture at the G20/F20 and positive reports about the Free Trade Agreement (FTA) with China, were welcome news for the bulk of the industry, Rabobank said.

The survey – completed approximately a month ago – reported 31pc of the farmers surveyed expected conditions in the agricultural economy to deteriorate in the coming 12 months (up from 24pc with that view in the previous quarter). A quarter (25pc) expected conditions to improve (down from 30pc), while 42pc expected similar conditions to last year (compared to 45pc in the previous survey).

Sustained dry weather a concern

Mr Knoblanche said the results showed the sustained period of dry weather was now a major concern for many of the country’s farmers.

“Dry weather has been a major concern for many farmers in northern New South Wales and Queensland for a number of quarters, and these recent results indicate that similar concerns are now setting in for western Victoria and across much of South Australia,” he said.

While climatic conditions were the main factor impacting confidence, the results indicated easing commodity prices at the time of the survey, particularly for grains and dairy, were another key reason for a negative outlook.

“At the time of the survey global grain prices were easing, which explains some of the declining results, but since that time there’s been some rebound in prices, which should help to ease those concerns,” Mr Knoblanche said.

“Global dairy prices have also eased from previous highs, and there’s still some concern out there about global factors like oversupply in China and the flow on effects of the trade embargo in Russia, but few would argue against the healthy longer-term fundamentals for dairy farmers.

“The Free Trade Agreement with China for example should be a boon to dairy farmers and has been warmly welcomed by most other sectors, and the elimination of tariffs for many agricultural products will bring us in line with New Zealand and ahead of many of our biggest competitors.

“In fact, for the period of this survey, the agricultural sector was in the spotlight on the back of FTA’s wrapping up with Japan and Korea, news of the impending FTA with China, and the focus on global food security around the G20 and Rabobank’s F20, all of which signals to farmers that policymakers are working with them.”

Farm performance concerns

In line with declining confidence in the outlook for the agricultural economy, Australian farmers reported reduced expectations about the performance of their own farm enterprises.

This quarter, 31pc of the surveyed farmers expected their own farm business performance to improve, while 42pc expected performance to remain the same as last year. A total of 25pc expected performance to worsen. Higher levels of optimism about farm business performance were recorded in Western Australia and New South Wales compared to other states.

A quarter of farmers (25pc) surveyed expected higher gross incomes in the coming 12 months while 43pc anticipated a similar income result to last year. A total of 30pc expected gross farm income to decrease. Income projections were highest among beef producers and canegrowers.

Despite the declining confidence, investment intentions remained stable, with 24pc of the surveyed farmers surveyed expecting to increase investment in their business over the coming year (compared to 25pc last quarter) and 61 per cent intending to maintain investment (from 60pc). A total of 14pc reported their intention to decrease investment (stable at 14pc previously).

“I think many farmers can see strong tailwinds for the industry, particularly in terms of market access, so while seasonal conditions are cause for some worry at the moment, I expect longer-term many farmers across the country are looking to upgrade equipment and keep an eye on opportunities for expansion,” Mr Knoblanche said.

Tasmania and Queensland’s farmers more confident

While rural confidence eased overall, Tasmanian and Queensland farmers surveyed reported some improvement in overall rural sentiment coming off a low base last quarter, while their counterparts in New South Wales maintained stable levels of optimism.

Although rural sentiment eased in Western Australia, that state’s farmers surveyed remained firmly optimistic, with 83pc expecting better (35pc) or stable (48pc) conditions in the year ahead. About 14pc of WA farmers surveyed were expecting conditions to worsen (up from 9pc previously).

Sentiment dipped significantly among the Victorian and South Australian farmers surveyed, after a number of stronger quarters for these states.

Mr Knoblanche said the overall dip in national confidence could be attributed to this significant decline in sentiment among farmers in Victoria (particularly in the west of the state) and South Australia.

“Farmers in these regions haven’t seen much moisture since August, which is a concern for soil conditions, pasture growth and stock water,” he said.

After a good start to the crop, grain-growers in parts of South Australia and Victoria also experienced significant frost events over winter, which impacted confidence around the quality and yield at harvest. However, Mr Knoblanche said the results have generally turned out better than expected.

Farmers surveyed in northern New South Wales and central west Queensland also continued to struggle with dry conditions.

Source: Rabobank

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