After three successive quarters of decline, South Australian rural confidence has rallied, with the State’s farmers now among the most confident in Australia.
According to the latest quarterly Rabobank Rural Confidence Survey, SA farmer sentiment improved significantly in the latest quarter, buoyed by good rains for the winter cropping season.
A comprehensive monitor of outlook and sentiment in Australia’s rural industries, the Rabobank Rural Confidence Survey questions an average of 1300 farmers across a wide range of commodities and geographical areas throughout the nation on a quarterly basis.
The survey, completed earlier this month, found 40 per cent of primary producers in SA expect the agricultural economy to improve over the next 12 months, up from 18pc last quarter.
The total number of farmers expecting the agricultural economy to worsen decreased to 10pc, down from 32pc last quarter.
Rabobank SA manager James Robinson said the State’s farmer confidence had staged a remarkable recovery, following three successive quarterly declines to March 2010.
He said farmer sentiment had received a boost from the generally widespread rain received over the winter months, coupled with improvement in wheat prices.
“The season to date would be considered average in most areas, and sufficient to establish and support planted crops,” Mr Robinson said.
“Crops are progressing well and are on track to achieve average to above-average yields or better, however much will be dependent on finishing rain in spring. Of note, those croppers who opted to plant wheat are in a particularly favourable position given the improvement in international prices of late.”
Rabobank’s Food & Agribusiness Research and Advisory unit advise that prices are expected to remain strong despite moderating in recent weeks.
Prices eased back from the peak of the rally, as some of the speculative activity washed out of the market in recent weeks. However, with the global grains balance sheet tighter, the bank does not expect prices to fall back to levels seen during the first part of the year.
With favourable weather conditions on the east coast, Australia is expected to produce between 22 and 23 million tonnes of wheat and export near 15m tonnes from this year’s crop.
Mr Robinson said feed conditions in pastoral areas are also favourable, while water allocations had improved from an opening mark of 21pc to 34pc more recently.
“Pastoralists are in a fair position, particularly those running sheep and with excess stock, as prime lamb and sheep prices are at near record highs for most categories,” he said.
The Rabobank survey found that of those SA primary producers surveyed who expected conditions to improve over the next 12 months, 63pc cited rising commodity prices as a major contributing factor, while 46pc nominated improved seasonal conditions.
Mr Robinson said the wine sector was still under pressure due to various adverse market conditions.
“Average export values continue to come under pressure from fragile consumer spending in key export markets, elevated levels of bulk wine exports, and a strong
Australian dollar,” he said.
“Additionally, irrigation rationing and wineries encouraging growers to reduce contracted production are believed to have contributed to lower yields.”
In terms of farmers’ own businesses, the survey found 52pc of SA survey respondents expected to see improved performance over the next 12 months, with just 7pc expecting business performance to worsen.
The result was significantly better than farmers’ perception of the overall agricultural economy.
The improvement in business performance expectations comes after a mixed quarter for gross farm incomes.
A total of 32pc of SA producers reported higher gross farm incomes in the final quarter of the 2009-10 financial year compared to the same period in the previous year, with 26pc reporting lower incomes.
The Rabobank survey found that investment intentions have remained stable with 93pc of SA farmers surveyed expecting to maintain or increase the current level of investment in their farm businesses in the next 12 months, up slightly on the 89pc recorded last quarter.
The next results are scheduled for release in November 2010.
