Strong farm spending plans for 2018

Farmers spending up while the good times roll


Agribusiness
Aa

Commonwealth Bank says more than a third of Australian farmers will upgrade infrastructure, machinery and invest in new ag technology in 2018

Aa

Farmers are planning another year of serious spending on machinery, fencing, sheds, yards and other infrastructure – and possibly, extra land.

A record number also want to invest in new technology and innovation initiatives as they take full advantage of generally bullish farm commodity prices and reasonable seasons to “make hay” while the good times shine.

Research from Commonwealth Bank of Australia (CBA) suggests about 35 per cent of Australian farmers intend upgrading infrastructure, plant and equipment in the year ahead.

West Australians are the most intent on investing in both better assets and new technology, with 37pc buying in each category, according to latest Agri Insights findings.

About 13pc are also looking to buy more farmland in WA 

Commonwealth Bank of Australia’s regional and agribusiness  executive general manager, Grant Cairns.

Commonwealth Bank of Australia’s regional and agribusiness executive general manager, Grant Cairns.

The Agri Insights study surveyed 1400 farmers nationally about their business intentions.

It found similar upbeat spending intentions a year ago when about 36pc of producers flagged plans to use their improving earnings on upgrading fixed assets and machinery.

“There’s a strong correlation between today’s commodity prices and investment intentions for new gear, capital works and use of new technology to help lift farm productivity,” said CBA’s regional and agribusiness banking executive general manager, Grant Cairns.

“To some extent we’re seeing quite a bit of asset rebuilding after coming off some very low points in the commodity cycle, particularly for beef and wool.

“Many farmers held on and sweated through the tough times, including drought years, but in the past two seasons or so we’ve had some record production results, and record livestock prices.”

 About 35 per cent of farmers in Australia expect to make fixed infrastructure and equipment upgrades a priority in 2018.

About 35 per cent of farmers in Australia expect to make fixed infrastructure and equipment upgrades a priority in 2018.

An average 31pc of all expenditure by Australian farmers in the past year was on upgrading farm infrastructure and equipment.

About 10pc was spent on land acquisitions.

Expanded investment in beef production for the past year also swallowed $1 in every $10 invested on farms, while the entire on-farm sector spent about 5pc on outside help from contractors and consultants.

Strong commodity prices have helped drive up land prices and now farmers are being pragmatically conservative about how much they should spend at this point - Grant Cairns, Commonwealth Bank

On the commodity front for 2018, sheep producers are the group most likely to expand the scale of their production output as they respond to positive market and seasonal signals.

Winter grain producers are more likely to be scaling back planting areas because of modest to low prices and ample global stocks.

Flock output expands

While about 57pc of sheep producers do not plan any notable changes to production, 33pc of woolgrowers are looking to increase their scale, as are 31pc of lamb producers.

CBA agri commodities analyst, Tobin Gorey, noted tight wool supplies were expected to keep prices high for another season or more.

Lamb prices were also set to be high until 2018, at least, although current flock rebuilding would ensure values did not hold up indefinitely.

Improved northern seasonal conditions and returning confidence among beef producers was encouraging about 24pc to expand output in 2018, but the Agri Insights study also noted 62pc were keeping herd numbers static, and 14pc wanted to scale back.

Two thirds of Australian dairy farmers expect to maintain their production status quo, but slowly improving global signals in the past year have convinced 24pc to ramp up production.

Land buying intentions are strongest in South Australia and WA (11pc and 13pc respectively) while around 8pc of farmers in NSW, Victoria and Queensland are looking to buy.

Mr Cairns said record low interest rates were helping bolster farmer confidence levels, but eastern producers seemed to be showing some caution and restraint on land purchases after witnessing significant property value rises in the past few years.

Land purchase caution

“Strong commodity prices have helped drive up land prices and now farmers are being pragmatically conservative about how much they should spend at this point,” he said.

“I think that sort of caution is healthy – it shows the sector is not getting carried away by the market mood.”

Tasmanian farmers appeared the most reluctant to buy at the moment, with only 1pc looking for extra land.

“Tasmania has actually seen quite a bit of land acquisition activity in recent times,” he said.

“The survey findings possibly reflect a cooling mood, or a lack of suitable country available for livestock producers.”

Tasmanians are, however, keen investors in technology-related farm innovation, with 38pc set to spend in the year ahead.

Farmers know getting the best tech on-farm allows them to do better in good years and position themselves to get through the tougher years - Grant Cairns, Commonwealth Bank

NSW leads the nation with its ag technology adoption plans for 2018, at 43pc, followed by Tasmania, then WA and Victoria on 37pc.

Agtech plans surge 

Overall, an average 37pc of farmers Australia-wide are likely to increase investment in technology and innovation, versus 3pc cent who plan to reduce their uptake.

That’s a big shift from the past year when only 6pc of farmers actually spent money specifically on agtech products. 

Mr Cairns said those intending to increase innovation spending initiatives were mainly doing so to enhance productivity and efficiency and reduce labour costs.

“Many talked in terms of longer term productivity,” he said.

“Farmers know getting the best tech on-farm allows them to do better in good years and position themselves to get through the tougher years.

“It’s about maximising return on investment not only from their equipment, but their people and their own time and effort.”

  • For more on the Agri Insights report see: www.commbank.com.au/agriinsights     

The story Strong farm spending plans for 2018 first appeared on Farm Online.

Aa

From the front page

Sponsored by