Drought saps confidence, but ag viability surging

Drought canes farm confidence, but most farmers stay viable


Agribusiness
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Despite drought, good agricultural market prospects are keeping farmer expectations upbeat

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Australia’s farm confidence levels have slipped to their lowest point in 12 years as drought gnaws hard at producer expectations for 2018-19.

However, good agricultural market prospects continue to keep most farmers remarkably bullish about their longer term expectations.

In fact, farm business viability is now trending at higher levels than it has for much of the past 10 years, with 93 per cent of the operators surveyed reporting positive viability.

A big U-turn in West Australian seasonal fortunes in the past few months has helped bolster the overall outlook, although WA farmers are the only producers with upbeat sentiment about immediate prospects.

On-farm investment intentions in WA and Tasmania are also strong among 32pc and 40pc of farmers in those respective states, but are slipping fast or static elsewhere after four years of robust farm spending activity.

Farmers have managed through droughts before and have put in place the infrastructure and systems to try to mitigate the impact as best they can - Peter Knoblanche, Rabobank

With all NSW officially in drought, the state’s farm confidence levels this week hit their lowest point in 17 years of Rabobank surveys.

Poor prospects for cotton and grain crops, subdued seasonal conditions for beef producers and another year of low sugar prices have also weighed heavily on the mood in Queensland.

The quarterly confidence survey of 1000 primary producers found 56pc of Australian farmers had a pessimistic feeling about agricultural economic conditions in the coming 12 months.

Only a third of producers held that view three months ago.

Just 13pc expected conditions to improve and 25pc anticipated similar conditions to last year (down from 41pc in June).

Drought was cited by 89pc of farmers as a key reason prospects were likely to worsen in 2018-19 – well above other concerns such as weaker commodity prices (11pc) and rising input costs (7pc).

Exceptional resilience

However, Rabobank Australia’s chief executive officer, Peter Knoblanche said despite the tough season challenges, farmers were demonstrating exceptional resilience and adaptability to manage their businesses through drought.

He pointed, in particular, to Queensland and northern NSW which had been plagued by drought for several years.

“Parts of central and western Queensland have been in drought for seven years with only sporadic short-term relief,” he said.

“The whole of NSW is drought-declared and its reach is spreading into South Australia and Victoria,” he said.

Yet drought had done little to dent the resilience of farm businesses, with farmers reporting relatively strong business viability.

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“The outlook for Australia’s ag sector is fundamentally very sound, with strong commodity prices – particularly for lamb, beef, wool and cotton and, more recently, grain – ensuring the majority remain in overall strong positions,” he said.

“Farmers have managed through droughts before and have put in place the infrastructure and systems to try to mitigate the impact as best they can.

“That is not to say it isn’t extremely challenging especially in areas where it has been so prolonged.”

Stockfeed needed for 2019 

He noted interstate movement of grain was set to continue into 2019 to provide much-needed feed grain to eastern Australia.

Grain and fodder prices were escalating with the scarcity, which subsequently was impacting on confidence in the sheep, beef and dairy sectors.

On the flipside, Mr Knoblanche said WA – which had previously experienced dry conditions – and parts of SA and southern Victoria were enjoying improved seasonal conditions.

WA’s was now looking at a potential 9.5 million tonne wheat crop.

“Farm businesses in these areas are in the front seat to take advantage of the current situation, with good harvest and price prospects aligning,” he said.

The story Drought saps confidence, but ag viability surging first appeared on Farm Online.

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