Weather, financial crisis overshadow optimism for farmers

Concerns over international markets and falling commodity prices have pushed farmer confidence to a two-year low

Concerns over international markets and falling commodity prices have pushed farmer confidence to a two-year low, according to the quarterly Rabobank Rural Confidence Survey of 1,200 farmers across the country.

Despite future benefits of lower input costs, a weaker currency and reduced interest rates, last month’s survey saw farmers preoccupied with short-term negatives.

While confidence is yet to hit the lows experienced in the drought-hampered years of 2002 and 2006, the results showed nearly half of the farmers fear the worse.

A substantial 48 percent of farmers say conditions will worsen during the coming year, up from 39 percent last quarter.

Of those producers, 58 percent blamed overseas markets, while falling commodity prices was top of mind for 37 percent.

Only 16 percent were optimistic about an improvement, a drop from 23 percent last quarter.

Rabobank General Manager of Rural Australia, Peter Knoblanche, says the latest survey is the first one where such a negative outlook hasn’t been driven by the effects of drought.

"The substantial rains that Queensland experienced through the summer months flooded many key agricultural regions," he says.

"The effects of these floods will have long-term benefits for producers, particularly those involved in dairy, grazing and cropping, however the short-term impact has also been detrimental to a number."

Despite the gloom, 22 percent of the respondents expect their own farm business’s performance to improve over the next 12 months.

While this figure is down from the previous quarter, Knoblanche says it is significantly better than farmers’ expectations of the overall agricultural economy.

"The variance between these two measures suggest an underlying confidence, as farmers feel more positive about their own situation than that of the agricultural economy as a whole," he says.

Some 43 percent believe seasonal conditions will be more favourable over the next 12 months.

While most sectors are less inclined to invest in their businesses in wake of the recession, dairy and cotton producers are most likely to go against the trend.

"Farmers in both sectors are looking to invest primarily in working capital, however there is also relatively strong interest in expanding farming operations via property purchase," Knoblanche says.

Overall, sentiment is stronger around grain, cotton and sugar producers, while the biggest decrease is evident in sheep, beef and dairy farmers.

Despite a widespread drop in confidence, Knoblanche says the decline appears to be more indicative of farmers’ concerns over the future, rather than a reflection of anything that has actually happened to date.

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