It’s not raining where it’s badly needed, but farmers across much of Australia are more optimistic about their industry’s outlook than they have been for at least two years.
Most of that optimism is still riding on the back of positive sentiment sweeping the sheep and beef sectors where historically high prices for sheepmeat, wool and beef continue rewarding livestock producers with healthy cash flows.
Rabobank’s latest rural confidence survey also points to a much better mood among dairy farmers and an upbeat cotton market helping underpin remarkably bullish expectations.
Notably, 28 per cent of all Australian farmers believe the rural economy will improve further in 2017-18.
Additionally, close to two thirds (59pc) expect conditions will remain stable in the year ahead, despite a frustratingly thirsty start to the winter cropping season in Western Australia, South Australia’s Eyre Peninsula, Queensland and northern NSW.
Cereal prices near 10-year lows are compounding grain sector unease.
However, solid prices have been the main driver of sentiment in the sheep and beef sectors as acknowledged by 85pc and 83pc sheep and beef producers, respectively.
“There has rarely been a better time to be a grazier,” said Rabobank’s national country banking manager, Todd Charteris.
“Beef, lamb and mutton continue to hit new records, and wool prices also at historical highs – albeit back from recent peaks.”
In fact, the 77pc of 1000 farmers surveyed who felt conditions should improve cited climbing commodity prices as reason for their positive outlook.
Upbeat sector trends
The latest bullish Rabobank results complement several similar recent findings by the agri banking sector, including Commonwealth Bank of Australia reporting farmer investment intentions and employment plans at their highest point in three years.
Rural Bank property sale research found median settlement prices leapt 9.3pc in 2016 – almost doubling rises achieved in 2015 – and National Australia Bank predicted savings in farm management deposits may climb to $6b by June 30.
Rabobank said confidence was strongest in Victoria, Tasmania and NSW, largely due to the market outlook for graziers, and “a flying start” to the cropping season and good grazing conditions in southern Australia.
Queensland had the best confidence upswing in response to strong market fundamentals for cotton and beef.
The national picture of more farmers feeling positive rather than negative continues a trend started in early 2015 and is now the longest run of positive sentiment in the 17-year history of the Rabobank confidence survey.
Those with a pessimistic view of the coming year stood at just 10pc.
Mr Charteris said widespread autumn rainfall had seen an ideal cropping season start in Victoria and southern NSW, but “northern NSW needs rain to fulfil planting intentions”.
Central NSW graingrower and National Farmers Federation’s competitiveness committee chairman, Dan Cooper, believed the mood among many farmers still reflected the relief which accompanied last season’s surprise 59 million tonne winter grain crop and excellent pasture growth, while rising cotton prices and good irrigation dam levels helped considerably.
Cotton price prospects are tipped to remain above $520 a bale in 2017-18.
“People are relatively positive, but there are plenty of frustrations, too, starting with current weather patterns in nearly all states,” Mr Cooper said.
“Several years of rising energy costs are also really starting to bite across many sectors now, and in regional businesses like abattoirs.”
Expectations of a correction in surging livestock markets, particularly prime lambs, were also not far from most farmers’ minds.
“We’ve got people who normally sell lambs now in the market as buyers – a correction seems pretty likely to follow at some point,” he said.
Rabobank’s findings concurred.
While confidence in the national agribusiness sector was up, individual farmers were slightly less optimistic about their own gross farm incomes in 2017-18.
About 31pc felt their farm incomes may rise, but almost half expected little change and 19pc tipped a fall.
Rabobank’s Mr Charteris also acknowledged while some dairy farmers were buoyed by their price outlook, on-farm cash flow was likely to remain tight until spring.
He said graingrowers were, unsurprisingly, the segment least excited about markets.
Worrying wheat outlook
The only likely support for local wheat prices would come from some anticipated softening in the Australian dollar, rather than a shift in global fundamentals.
Increased plantings were subsequently expected in canola and pulse crops, particularly chickpeas and lentils, at the expense of wheat, barley and oats.
Meanwhile, Rabobank found use of sensor technology such as drones, moisture probes, yield mapping and auto drafting had been adopted by 57pc of farming businesses with gross incomes above $1 million.
The overall farm sector uptake was, however, relatively low 23pc.
“While sensor technologies are increasingly being used and talked about, particularly crop yield mapping, there is still a long way to go,” Mr Charteris said.
“The uptake is hindered by the cost of the technology compared with benefits for both productivity and profitability.”