SHEEP producer confidence took a leap forward this quarter on the back of an improved seasonal outlook and commodity prices, according to the latest Rabobank Rural Confidence Survey.

Rabobank group executive for Country Banking Australia, Marcel van Doremaele, said net sentiment in the sheep industry has tipped back into positive territory – one percent from -37pc — in the third quarter survey.

This follows more favourable seasonal conditions in many regions and the prospect of stronger prices giving them hope for the coming year, he said.

“However, sheep producers remain very concerned about government policies – especially the threat to live export – with WA’s sheep industry in particular bearing the brunt on the long-awaited, finally received hard deadline for live exporting sheep, which was handed down prior to this survey.”

The survey found that sentiment among the country’s agricultural producers had rallied heading into spring, although farm sector confidence remained just shy of net ‘positive’ levels – with still slightly more farmers holding a pessimistic outlook than those expecting a better year ahead.

Farmers had begun the year with a surge in optimism, but sentiment had fallen by mid-year due to the worryingly late – and in some cases no – ‘autumn break’ for winter cropping regions, especially in Western Australia and South Australia, Rabobank said.

However, beneficial rainfall in the west and along the eastern seaboard put the brakes on sliding seasonal confidence this quarter. And improved prices for sheep and beef producers also supported optimism about the agricultural economy ahead.

Farmer confidence improved in every state, although only New South Wales and Tasmania recorded net positive sentiment (with more farmers expecting conditions to improve than deteriorate). Confidence also lifted in all commodity sector surveyed, except for cotton.

Mr van Doremaele said more promising market signals, particularly in the livestock sectors, along with positive seasonal conditions and production outlooks in many parts of the country, had resulted in farmers taking an overall more bullish view this quarter.

“Although some parts of the country are still grappling with the impacts of unusually dry weather through autumn and winter, it’s encouraging to see the patchy start to this year’s season have been corrected in many farming regions, especially in WA where seasonal conditions looked dire last quarter but have really turned around,” he said.

“Farmers are still managing challenging conditions in south-west Victoria and across South Australia which continue to put pressure on winter crops and feed for livestock,” he said.

And grain growers in these regions are particularly holding hope for good spring rainfall to finish crops following the very dry winter.

“The ENSO (El Niño Southern Oscillation) Outlook remains at La Niña watch – meaning there are signs La Niña may develop later in the year and the potential for a wetter spring has held promise during the survey period, which has helped confidence track back up.”

Mr van Doremaele said shifts in key commodity markets had also helped to boost farmer confidence this quarter.

“Livestock producers are more optimistic after improvements in cattle and sheep prices, and there are also positive signals for dairy production.

“Grain and cotton farmers though face more bearish conditions with global drivers putting downward pressure on prices,” he said.

“There are also encouraging economic drivers underpinning farmer sentiment, including interest rates, with market forecasts of cuts in the official cash rate next year. In addition, the high cost of farming inputs, such as fertiliser, has also been easing, which is especially critical to farmers’ ‘bottom lines’, taking into account the impact of depressed grain markets.

“So, some easing of economic pressures, combined with useful winter rainfall for those regions which received it, has seen many farmers are tracking towards the end of the year with a more positive mindset. Others though do remain glued to the outlook and in need of a wet spring to finish crops and replenish feed reserves to ease pressure on feeding livestock.”

More farmers expect ag economy to improve

The Q3 survey, completed last month, found those Australian farmers expecting the agricultural economy to improve in the coming 12 months had increased to 23pc (from 15pc with that view in the previous quarter). And fewer respondents (27pc) were now expecting conditions to worsen (down from 36pc).

A similar number to last quarter (47pc) had a stable outlook on the year ahead, anticipating the agricultural economy to remain the same.

Key drivers for optimism in the sector were found to be a positive outlook on commodity prices (nominated by 32pc) and good seasonal conditions (31pc).

While drought remained the leading worry for farmers – nominated by 31pc – this was down on 37pc with that concern last quarter. There was also less concern about rising input costs (cited by 29pc, down from 35pc) and falling commodity prices (22pc, dropped from 32pc).

Interest rate worries remained stable quarter-on-quarter, although there was increasing concern about the threat to live export, following the announcement in July that live export of sheep will end in May 2028.

Tasmanian farmers are the most optimistic

While there was an upturn in farmer confidence across all states, sentiment levels varied considerably, Rabobank said.

Tasmanian farmers are the most optimistic in the country, with net confidence levels jumping to 40 pt, up from -16pc just three months ago. Improved cattle and sheep markets supported the improved outlook, while prolonged dry conditions were broken by some useful winter falls of rain, although many parts of the state have more recently grappled with an overabundance of rain in recent weeks, Rabobank said.

New South Wales was the only other state to climb back into net positive confidence levels, lifting to one percent from -11pc in the previous quarter. The move back into positive territory is founded on easing concerns about drought and commodity prices in the state.

While many Victorian farmers are still managing unusually dry seasonal conditions in parts of the state, a reasonable season in northern regions helped to drive a lift in farmer confidence. A quarter of Victorian farmers are now hopeful conditions will improve, pushing net confidence levels from -31pc to -4pc this quarter.

Queensland’s rural confidence climbed thanks to solid seasonal conditions and rising commodity prices. Net confidence now sits at -4pc, up from -13pc, supported by expectations of typical seasonal rainfall conditions in coming months.

South Australia’s rural sector reported the lowest sentiment in the country – subdued by below-average winter seasonal conditions – but net confidence still lifted from -38 per cent to now sit at -27 per cent. Confidence in red meat markets provides a much-needed shining light in a state where livestock producers are reassessing feed budgets and grain growers are recalibrating their yield expectations as they roll towards harvest.

Farmer confidence lifted in Western Australia, to -8pc from a net – 21pc last quarter. Increased concerns about the threat to live export – now that a deadline has been formally announced for the end of the live sheep trade – were offset by seasonal relief from much-needed rainfall which fell across the state’s wheatbelt during winter and improved domestic sheep and cattle markets.

Investment and incomes

Rabobank said the nation’s farmers also reported a slight increase in appetite to invest in their farm businesses this quarter. More planned on increasing their level of investment in the year ahead (24pc, up from 21pc last quarter) although 14pc intended to invest less (compared with 13 pc previously).

More farmers also expect their farm incomes to increase over the next 12 months – 30pc, up from 21pc last quarter — while the number expecting a lower income had declined to 27pc, from 32pc.

“Despite seasonal variability, the outlook for Australian agriculture this financial year is for growing production value, and average incomes for broadacre farms are anticipated to increase in 2024-25. This improvement in income supports farmers’ confidence in investing back into their business,” Mr van Doremaele said.

On-farm infrastructure – such as fences, yards and silos – remains the primary focus, although slightly fewer farmers across the country identified this as an area for investment this quarter  — 58pc, down from 6pc last quarter.

Rabobank said adopting new technologies was the second highest area of planned investment  — 31pc, down from 36pc last quarter, followed by new plant and machinery that was stable quarter-on-quarter at 22pc of farmers.

Farmers’ appetites for rural land purchase remained relatively stable this quarter, with 12pc – up from 11pc – of farmers nationally expressing interest in expanding their farming operation.