Farmers finish a record year with positive outlook to continue the trend into next season

Even potentially devastating rain storms couldn’t put a downer on the 2021-22 winter crop harvest as farmers from all sectors count their blessings and look towards the next big plant

There is hardly a farmer in the country that won’t be eying off a new Ute from a season expected to raise a record $78 billion in farmgate value – and wait – we are just getting started

It’s fair to say that a semi-trailer could smash through any farmhouse and the owner would walk out without a scratch and collect millions off the insurance, such is the Teflon non-stick nature of farm negatives. There just aren’t any.

This is the state of farming as we finish bringing in a record harvest and turn attention toward the biggest crop planting that will ever be recorded across the country, for the 2022-23 winter season.

And according to a recent survey, every farmer seems to be on the same page, and are predicting the get-rich combination of high commodity prices, low interest rates and good seasonal conditions will continue into 2022.

The impact of recent excessive rainfall and flooding in southern Queensland and northern and central New South Wales’ grain-growing regions on the point of harvest could have turned up some devastating results, but while yet to be taken into account for those affected, it is still a record grain sector season never-the-less.

Obviously, there are growers in impacted regions that will be counting the cost of significant downgrades or complete ruination, but overall, it is still the biggest winter harvest on record with the ultimate combination of high prices.

And as to livestock producers in the most devastated areas, they ducked the bullet in the main and continue to enjoy sustained high commodity prices and favourable grazing conditions.

And a farming segment that has been struggling over the past few seasons, summer croppers and cotton producers look set to capitalise on surety of water supplies and full soil moisture profiles for a bumper season.

The survey results this time around followed a quarter of record high optimism, and while overall national farmer confidence had softened on last quarter, it remains at still strong levels, with 84% of farmers surveyed forecasting the agricultural economy will continue to perform at, or exceed, its currently-excellent levels in the year ahead.

The survey has also reported record high levels of business viability, with the Farm Viability Index – measuring farmers’ assessments of their own business viability – now sitting at the highest level in the survey’s history.

Rabobank Australia CEO Peter Knoblanche, who conducted the survey, said strong demand for Australian commodities, good seasons and favourable business settings were supporting solid, long-term confidence, although this would likely be diminished among grain growers and other flood-affected producers heading into the end of the year.

“Overall, there is significant long-term positivity in our farm sector – we see it in the high levels of farm viability reported, in farmers’ strong investment plans, and in the optimism about the year ahead,” he said.  “But while above-average rainfall has been a blessing in some sectors, it has caused significant heartbreak in others.

“The full extent of the damage to this year’s east coast winter grain harvest, in particular, is still being assessed, and it’s unclear yet just how much grain has been downgraded to feed quality, and how much will be a write-off.  This is particularly heartbreaking for grain growers as they were very optimistic about this year’s crop – it had enormous potential in both yield and value.”

The latest survey found 35% of farmers surveyed nationally were expecting conditions in the agricultural economy to improve over the year ahead, easing from 43% with that view in the September quarter.

A further 49% of respondents reported they were expecting farm business conditions to remain stable over the coming 12 months, while 13% expect conditions will worsen – an increase on the 4% of farmers with that view last quarter.

Rising commodity prices continue to be the primary driver of positive outlook across all sectors, with 77% of farmers expecting conditions to improve citing commodity pricing as the key reason.  Favourable seasonal conditions were still also a cause for optimism, but less so this quarter – cited by 58% of those expecting improved conditions (down from 70% last quarter).

Mr Knoblanche said Rabobank’s Rural Commodity Price Index (comprising local prices for 10 agricultural commodities) eclipsed its previous all-time high in November, with small drops in the price of sheepmeat, wool, and sorghum offset by increases for all other commodities, particularly canola, to set a new benchmark in the 12-year history of the index.

The ongoing rise in input costs – particularly fertiliser and farm chemicals – was growing as a concern, however, Mr Knoblanche said, and could be a significant challenge for the farm sector next year.

Rising input costs were the main issue nominated by farmers in the survey who were expecting conditions to deteriorate in the year ahead (cited by more than half).  By comparison, 4% attributed their pessimistic view to COVID-19 and 4% to too much rain.

Grain was a star performer but the wealth was spread across a wide geographic area and from all farm sectors

How the States compare

Before the recent rainfall deluge and subsequent flooding, Queensland and NSW producers had been the most confident about business conditions next year – 90 and 88% respectively forecasting conditions to continue to be good, or improve further, over the year ahead.

In Queensland, Mr Knoblanche said, recent rainfall was being viewed as having more positive than negative impacts by many producers and would be a boon for the state’s pastoral industry heading into summer.

Impacts from recent rainfall and flooding were mixed in NSW, with the most negative effects confined to croppers in the Central and North West regions, while farmers in the Riverina are eager for weather to warm up and crops to dry out for the southern harvest.

Farmer confidence in Western Australia retreated from the 10-year highs recorded  last quarter, but remained at positive levels in the latest survey, with a record harvest forecast for the state.

Mr Knoblanche said rising input costs and the impacts of a frost event in spring appeared to have taken some of the edge off farmer confidence in the west.  “But to a large degree it is probably a case of farmers there thinking things can’t get much better than they are right now,” he said.

Sentiment also declined, though remained at relatively strong levels, in South Australia, with the state’s producers missing out on crucial spring rainfall, and optimism about the year ahead waning among grain growers in particular.

As with the rest of the country, Tasmanian rural confidence also eased slightly, but was still tracking at very strong levels, with 90% of the state’s farmers expecting a continuation or improvement in the current excellent business conditions (albeit down on the 100% with that view over the previous two quarters).

Conditions for the state’s beef and dairy producers continue to be excellent, which is underpinning much of the positivity, however ongoing wet conditions are presenting some challenges.

Wet conditions have not significantly dented confidence among farmers in Victoria, although sentiment has eased during the latest quarter. Workforce shortages and rising input costs are shaping up as concerns heading into 2022.

How the farming sectors compare

While seasonal conditions and returns are still excellent for the meat and dairy sectors, the survey revealed concerns about weather impacts were already mounting for grain growers leading into harvest of winter crops.

At the time of the survey, and before the impact of flooding and too much rain in the eastern states, grain sector confidence had already begun to retreat – this quarter 39% of the nation’s grain growers expressed optimism about improved conditions (from 64% last survey) while 26% thought conditions would worsen (up from one per cent).

Mr Knoblanche said summer croppers in the eastern states have largely welcomed the spring deluge, and even flooding will provide a beneficial soak in some areas, however there are reports that some summer crops will need replanting after too much rain, especially in the Liverpool Plains of NSW and southern reaches of the Darling Downs and border region in Queensland.

Cotton sector confidence was again the stand-out this quarter, with 78% of growers surveyed expecting business conditions to improve in the next 12 months (was 70% in September), and analysts expect this to be the case for some time, given the now-healthy state of water storages and dams in cotton-growing regions.

Positive seasonal conditions continue to support young cattle prices with stunning strength continuing in Australia’s beef market translating to firm optimism among beef producers.

Sheepmeat producers have also had a solid year with strong returns, underpinning optimism and longer-term business plans.

Mr Knoblanche said limited livestock numbers combined with strong global demand for sheepmeat should help keep demand and prices high.

Meanwhile, for wool growers, fine and superfine wool prices are holding at high levels on the back of improved demand and combined with excellent seasonal conditions.

While dairy sector confidence has eased, it is still very solid this quarter, and good seasonal conditions, water availability and demand are underpinning longer-term optimism about business conditions over the coming couple of years, fuelling ongoing investment within the sector.

The survey found a combined 90% of the country’s dairy producers optimistic the current conditions will either continue or improve over the year ahead.

Farm business performance and investment

In line with an overall easing in sentiment, farmers have slightly revised down forecasts for the financial performance of their own businesses. The latest survey found 47% of those surveyed expect their gross farm incomes to increase over the year ahead (was 51%) while 40% predict earnings to be the same.

Mr Knoblanche said assessments of the damage to the large areas of rain and flood- affected crop were still ongoing and will significantly impact returns for those affected within the grains sector.

More generally, however, the survey showed farmers were continuing to look for expansion and investment opportunities. On-farm projects and infrastructure which boost productivity, efficiency and alleviate workforce pressures were a particular focus.

The survey found close to 40% of farmers surveyed expect to increase investment in their farm business next year.  For those intending to increase spending, 71% is earmarked for on-farm infrastructure and 53% for new plant and machinery.

One quarter of those looking to increase business investment plan to do so through property purchase and expansion.

A comprehensive monitor of outlook and sentiment in Australian rural industries, the Rabobank Rural Confidence Survey questions an average of 1000 primary producers across a wide range of commodities and geographical areas throughout Australia on a quarterly basis.

The most robust study of its type in Australia, the survey has been conducted by an independent research organisation interviewing farmers throughout the country each quarter since 2000.