Confidence remains high for farmers as the year comes to an end, with optimal seasonal conditions, high commodity prices and low interest rates expected to carry on into 2022.
According to the Q4 Rabobank Rural Confidence Survey, Australian farmers are still optimistic, if slightly moderated from the previous almost record breaking rates in the previous period.
At the time of the survey 84% of Australian farmers anticipated the agricultural economy would continue at its current level or surpass the already excellent conditions.
“Overall, there is significant long-term positivity in Australia’s 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,” said Peter Knoblanche, CEO of Rabobank Australia.
However, due to the timing of the survey, the fallout from the rainfall and flooding across southern Queensland and northern and central New South Wales hasn’t been taking into account.
“But while above-average rainfall has been a blessing in some sectors, it has caused significant heartbreak in others,” added Knoblanche.
With many crops damaged or destroyed in these regions, grain yields and resulting incomes across the grain sector are likely to be heavily reduced from what was expected to be one of the most significant winter harvests ever recorded.
The survey also revealed that 35% or farmers expected conditions to improve across the agricultural economy over the next year, which is down from 43% in the September quarter.
While 49% anticipated conditions to remaining stable for the year, with 13% feeling less optimistic and predicting conditions to worsen, up 4% on the past quarter.
Confidence in the industry is being driven largely by commodity prices, at 77%, followed by favourable seasonal conditions at 58%, down from 70%.
This confidence is not without good reason as positive seasonal conditions and strong commodity prices were recently reported to push pushed annualised total returns for annual crop farmland to 41.88% by ANREV with Australian farmland returns back in September being reported at 15% over the 2021 financial year.
On the other hand, increasing input costs were named as the main concern for worsening conditions by more than half of those surveyed, while just 4% named COVID-19 and 4% too much rain.
Queensland and NSW were the most confident at the time of survey, at a respective 80% and 88% predicting good or improving conditions for the upcoming year.
While in Tasmania confidence was down from astounding 100% in the previous quarter to a still strong 90% of farmers expecting a continuation or improvement in the current excellent business conditions.
The corn sector experienced a boost to confidence this quarter at 78% compared to 70% in the last, while grain even before the rainfall and flooding fell to 39% from 64%, with 26% expecting worsening conditions.
The dairy sector were very confident with 90% of producers feeling optimistic that conditions would continue or improve.
While in the last quarter 51% of farmers expected their gross farm incomes to increase over the next year, in the fourth quarter this eased to 47%.
Though farmers are still looking to investment and expansion opportunities, with 40% looking to increase investment over the next year, with 71% looking to increase spending on infrastructure and 53% on new plant and machinery.
While around 25% plan to increase their investments through property investment and expansion.
“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,” concluded Knoblanche.
