Rabobank’s quarterly survey of farmers’ state of mind has revealed a dip in confidence due to uncertainty about the impacts of COVID-19, but good rains and solid commodity prices are keeping spirits up.
Confidence has retreated from the historic highs recorded earlier this year when shoppers were stripping supermarket shelves of everything they could get their hands on, due mainly to concerns about the potential impact of the pandemic on both prices and trade.
Counteracting those creeping doubts has been the longed-for return of good rain since February that is driving newly upbeat farmer expectations about money coming in the door and the ability to make postponed investments in their businesses
The survey, completed last month and taken at the height of the coronavirus restrictions, found 33 per cent of farmers surveyed nationally expect conditions in the agricultural economy to improve over the coming year, down from 46 per cent with that view in the March quarter. Farmers expecting a deterioration in business conditions increased to 23 per cent (from 15 per cent last quarter), while 37 per cent expect conditions to remain the same (slightly up from 32 per cent previously).
Falling commodity prices were cited by nearly half (47 per cent) of those expecting conditions to worsen, while the impact of COVID-19 was identified by 28 per cent of producers.
Farmers in NSW have defied the national trend, with positive sentiment about the coming year increasing compared with the last survey, overwhelmingly due to the continued improvement in seasonal conditions and winter cropping activities.
Higher water availability ahead of the 2020/21 cotton season, and a wetter-than-average three-month outlook, has triggered a major turnaround in farm sentiment for cotton producers, now the most confident sector about prospects for the coming year.
“Winter cropping activities are in full swing and the forecasts already are for a bumper harvest, which is really positive news for the nation’s crop farmers after so many years of drought,” said Rabobank Australia CEO Peter Knoblanche.
“Livestock rebuilding is also underway and confidence among beef and sheepmeat producers is generally very good, particularly in light of excellent prices at the moment.”
In addition, he said, the agricultural sector had also been benefiting from a relatively lower Australian dollar and historically low borrowing costs.
Autumn rainfall across much of the Murray-Darling Basin, coupled with a positive winter rainfall outlook, has revived cotton cropping prospects, with cotton the most optimistic sector in the country. This quarter, 44 per cent of cotton farmers expect conditions to improve, up from 27 per cent in March.
That strong sentiment is closely followed by the grains industry, with 42 per cent of growers nationally reporting an improvement in business sentiment, almost entirely seasonally driven.
Sentiment is strong among beef producers, with 35 per cent positive about an improvement in conditions, buoyed by strong commodity prices.
Sentiment in the sheep sector has deteriorated, mainly due to wool prices, with 23 per cent of sheep farmers reporting an optimistic outlook on the year ahead (down from 36 per cent in March) and 36 per cent expecting business conditions will worsen – up sharply from 18 per cent.
Trade uncertainty is affecting sentiment in the dairy sector with a significant increase in the number of farmers expecting conditions to worsen – 31 per cent now compared with 13 per cent in March.
Farm business performance and investment
Over the next 12 months, 33 per cent of farmers surveyed said they expect their gross farm incomes will increase (down from 38 per cent with that view in the previous quarter) while 36 per cent expect incomes will remain the same over the year ahead.
In NSW, where drought recovery is most pronounced, 45 per cent of farmers expect incomes will increase over the year ahead, while 49 per cent of grain farmers nationally are expecting an upturn in incomes.
On a national basis, 25 per cent of those farmers surveyed intend to increase investment in their enterprise, either on farm or through expansion.
The trend for increasing investment was highest amongst farmers in Tasmania where 33 per cent intend to invest more this year, while 43 per cent of cotton growers and 33 per cent of dairy farmers said they will increase their business investment.
Across the country, the bulk of investment was earmarked for on-farm infrastructure, with 56 per cent of investment identified for on-farm spending this quarter compared with 50 per cent at the start of the year.
This quarter, farmers were asked specifically about the impact of COVID-19 and related restrictions on their farm businesses.
Interestingly, while a large number of respondents attributed volatile commodity markets and COVID-19 as a key reason behind worsening sentiment for the year ahead, 44 per cent of farmers said COVID-19 and related restrictions had had no direct impact on their business.
This was split evenly with those who identified a ‘minor negative impact’ on their business (also 44 per cent), while a ‘major negative impact’ was cited by eight per cent of respondents. Impacts included problems obtaining supplies, supplies being more expensive and not being able to go to sales and auctions.