Farmer confidence at an all-time high on the back of boosted incomes

Australian farmgate production is on track to reach a record-breaking $66.3 billion this year

The farming sector has navigated the uncertainties and challenges posed by COVID-19 and changes in the international trade landscape to reach a record $66.3 billion of farm produce, and we have earned just under $47 billion in agricultural exports from that haul.

This result is due to strong domestic livestock prices, and because the pace of Australian grain exports has been faster than expected after harvesting the second largest winter crop on record.

The market has seen an impressive turnaround in wheat, barley and canola shipments. Particularly for barley, this result demonstrates the resilience of supply chains, the benefits of a diversified production base and access to a diverse range of international markets.

Next year (2021-22) the gross value of production is forecast to fall from the record high of 2020-21 but still sit at around an impressive $65 billion.

“Prospects are positive for the next winter crop which has seen record high area planted, but it’s very unlikely to see two record years back-to-back,” Dr Greenville from Abares said.

“The value of exports is forecast to grow to $49.7 billion in 2021-22, driven by higher beef, wool and dairy exports, as well as a sharp recovery in cotton exports.

“Herd and flock rebuilding is still ongoing, but we are expecting more animals to begin flowing into meat processing in 2021-22, which is also likely to ease margin pressures on the red meat processing sector.

“The impact of mouse plagues has been locally devastating, but on the national scale the damage has been reasonably limited.

“The worst impacts have been to stored grain and hay across parts of Queensland and New South Wales, although high mouse activity has been observed in many parts of the wheat belt.

“The worst of the mouse plague is likely to be behind us as cool and wet winter conditions slow breeding rates.

“There does remain a risk of a resurgence if winter is warmer than expected.”

Hopes are once again high for this year’s winter crop with a record area planted

Agriculture Minister David Littleproud said it was a great result for the agricultural industry and added that the announcement of the free trade agreement would provide yet another market for exporters.

He said that the federal government was supporting farmers with a $400 million investment to strengthen biosecurity, $29.8 million to grow the agricultural workforce, and $15 million to improve trade and market access.

As might be expected, farmer confidence is riding high and the latest Rabobank Rural Confidence Survey reports almost 90% of farmers expect the good times to continue or even improve over the year ahead.

Rabobank Australia CEO Peter Knoblanche said the latest survey results were a reflection of just how positive the current operating environment was for Australian agriculture, with an “ideal combination of positive seasonal, financial and commodity market factors”.

“There is certainly a view out there among many farmers that business conditions right now are excellent. Many would say it’s as good as it gets, and they can’t see how it could get any better,” he said.

“Strong prices for grain and terrific growing conditions in most regions have driven another near-record winter crop planting program across the country, with early estimates for a second-straight year of bumper tonnages of wheat, barley and canola when harvested at the end of the year.

“Meanwhile commodity prices in the beef and lamb sectors are also supporting producer confidence, with low supply and high demand for protein pushing prices to levels not seen before. And dairy confidence is also strong on the back of favourable milk price contracts and improved water allocations.”

In another indication of the sector’s current financial strength and stability, the Rural Confidence Survey’s Farm Viability Index – measuring farmers’ assessments of their own business viability – had continued to edge higher in the latest quarter to sit at a new record 20-year high.

Completed last month, the latest survey found 35% of farmers nationally were expecting conditions in the agricultural economy to improve over the year ahead. 

And, the survey found, a further 54% of respondents were expecting the current positive conditions to continue for the coming 12 months, while just 8% expected a deterioration.

Mr Knoblanche said that while the current mouse plague was causing anxiety for farmers in affected areas, primarily in central western and northern New South Wales, it had not registered as a major concern in the survey, cited by 5% of those expecting conditions to worsen as the reason for their pessimism.

Domestic prices for beef cattle hit new records with demand from growers looking to restock herds

Rural sentiment was found to be strong in all states and across all sectors.

Beef, lamb, and dairy producers were particularly buoyed by high commodity prices, while excellent seasonal conditions underpinned solid sentiment among cotton and grain producers.

The survey found that across all sectors, commodity prices were the primary driver of confidence this quarter – cited by 69% of those farmers expecting conditions to improve. Seasonal conditions buoyed sentiment among 51% of farmers who had a positive outlook on the year ahead.

2021 a pivotal year

Mr Knoblanche said 2021 was shaping up to be an instrumental year in the long-term prosperity of the Australian farming sector.

“For most farmers, we are seeing a second year of very good seasonal conditions, high to very high commodity prices, low interest rates and favourable infrastructure investment incentives from government.

“The benefit of another year like this for Australian farming shouldn’t be under-estimated. This will allow many farmers to really consolidate their position after years of drought – to further reinvest in their businesses to make them more efficient and resilient, and to expand and grow their businesses for the future.

“Many of our country towns are booming, there is tremendous regional growth and employment and the strength and stability in the agricultural sector is playing a significant part in that.”

Mr Knoblanche said even in those areas where seasonal conditions had not been optimal heading into winter, such as the cropping regions of South Australia and northwest Victoria, there was still a high level of confidence that the current positive business conditions would continue, and gross income projections for farm businesses were very good.

Confidence was found to be strongest in Tasmania and New South Wales, where 45% and 44% of farmers respectively were tipping conditions to improve.

In NSW, a large boost to water allocations and the prospect of another big grain production year were sustaining high levels of farmer confidence, despite some concerns around the mouse plague.

In Tasmania, farm confidence had hit a six-year high, with the state’s dairy farmers particularly upbeat on the back of good opening milk contracts and a great lead into winter.

Tasmanian dairy farmers are feeling upbeat with a favourable lead into winter and milk contracted at a good price

Forecasts for farm business incomes and performance are also holding firm, with 40% of farmers surveyed expecting an increase in gross farm incomes in the next 12 months, while 45% expect similar incomes to last year.

Mr Knoblanche said with a great production year behind them, and another one on the horizon, many Australian farmers were making longer-term investment plans and putting money back into their own enterprises through equipment and infrastructure upgrades as well as property expansion. 

The survey found 34% of those surveyed nationally expect to increase investment over the year ahead, while 60% will maintain business spending at current levels.

Mr Knoblanche said farmers were taking the opportunity to improve their assets and upgrade their operational infrastructure while the seasons, commodity prices and interest rates were all working in their favour.

And, while there was intense interest and competition for agricultural land, he said, those farmers who weren’t in a position to buy more land were investing on-farm to make the property they own “work harder for them”.