Rabobank group executive for country banking Australia, Marcel van Doremael

VICTORIAN sheep producers are leading a national increase in farmer confidence, according to results from the latest quarterly Rabobank Rural Confidence Survey released last week.

The survey found Victorian farmer confidence rose to the highest level nationally, jumping from a net -39 percent to 21pc, driven by anticipation of favourable seasonal conditions and commodity prices for the year ahead.

Victorian sheep producers were the most optimistic of the state’s farmers this quarter, as they hold onto hope the market will provide more promise than the variable conditions experienced in 2023, a Rabobank release said.

The survey found that confidence in the red meat industries took a significant turn for the better this quarter. Nationally, net confidence in the sheep sector bounced back from -45pc at the end of 2023 to 27pc this quarter, and net confidence among beef producers jumped from -40pc to now sit at 29pc.

Sheep producers are hanging their hopes on rising commodity prices – nominated by 59pc who think the economy will improve, while 27pc credit their positivity to expectations of a good season.

Rabobank group executive for country banking Australia, Marcel van Doremael, said while sheep prices haven’t seen the same lift as cattle prices and they have dipped a bit since the start of the year, they are still performing better than the lows of last year.

“This gives producers confidence of a better year ahead, especially in tandem with improved seasonal conditions.”

Confidence up for first time since June 2022

The survey found national farmer confidence has returned to “positive territory” for the first time since June 2022, with more farmers now optimistic than pessimistic about the year ahead.

Net national rural confidence rose significantly from a reading of -41pc in the last quarter of 2023 to 15pc in the first quarter of 2024.

Nearly a third of farmers across the nation (31pc) expect the agricultural economy will improve over the next 12 months – more than double last survey (14pc). There was also a significant drop in the number who anticipate conditions will worsen – down to 16pc from 55pc.

Farmer confidence lifted across the country, although Tasmania and Western Australia were the only two states where confidence remained at net negative levels, despite seeing sentiment rally considerably since the end of 2023.

Rising commodity prices topped the list of reasons Australian farmers gave for their positive outlook (nominated by 58pc of those expecting the agricultural economy to improve).

Farmers were also increasingly positive about seasonal conditions – cause for optimism among 40pc of those expecting a better year ahead.

Mr van Doremaele said one of the key reasons Australian farmers have moved confidently into 2024 was in response to better-than-expected seasonal conditions through summer.

“This – along with expectation of positive farm margins for the year ahead – has driven the most significant turnaround in confidence we’ve seen in several years,” he said.

The latest survey, completed last month, found with summer rainfall topping up sub-soil moisture in many of the nation’s cropping zones and delivering a boost to the feed base across grazing regions, drought had fallen away as a concern for those farmers who believe the agricultural economy will worsen – nominated by just eight per cent this survey, down from 45pc in the last quarter of 2023.

There was also a drop – although not as steep – in those concerned about falling commodity prices. This was now a factor for 45pc of farmers who expect the agricultural economy to worsen over the next 12 months, after spiking at 64pc in the previous survey.

“Although agricultural commodity prices remain well below the highs we saw in 2022, the outlook is more positive for this year,” Mr van Doremaele said.

“In particular, beef and sheep prices are set to be above the lows we saw last year, and that has driven up the confidence of red meat producers.

“The market is starting to re-set following the high volumes of livestock which hit the market last year and which, paired with the dry outlook, had depressed prices,” he said.

“We’ve already seen price gains this year for beef and sheep off the back of strong rainfall and re-stocker demand returning.”

More farmers reported being concerned about rising input costs this survey (cited by 37pc of those with a negative outlook on the year ahead, up from 28pc in the previous quarter), while overseas markets/economies were also an increasing worry (for 18pc, up from nine per cent).

About a fifth of farmers surveyed (21pc) indicated they are looking to increase investment in their business in the coming year (up from 15pc in the previous quarter) and only 12pc intend to decrease investment (down from 29pc).

“Farmers took a very conservative approach to spending last year, mindful of reduced incomes and the uncertain summer forecast, but they now have more confidence to boost their budgets following improved seasonal and economic outlooks which underpin positive farm margins in key agricultural sectors this year,” Mr van Doremaele said.

Farmers are ready to spend up big on silos, fences and yards, with 61pc who intend to increase their investment nominating on-farm infrastructure (up from 52pc last quarter).

Seasonal and market improvements also supported the intention to increase livestock numbers for around a third of farmers who are looking to increase their investment (34pc, up from 20pc).

Concerns about the impact of rising interest rates eased slightly and worries about the Australian dollar remained at low levels.

Read the full Rabobank media release here.