For the second year running a harsh, dry autumn has punched a hole in many farmers’ optimistic financial expectations for their sector.
However, Rabobank says promising longer term prospects for agriculture have convinced 20 per cent of producers to look for more land to expand their businesses within five years.
As many as one in every three West Australian and South Australian farmers are preparing to buy extra land, particularly in the grain sector.
Expanding their livestock herds and flocks and building new fences, stockyards and silos are also still on the “to do” list in the year ahead for many producers Australia-wide.
Yet, after starting the year on a generally bullish note, Rabobank’s Rural Confidence Survey has showed a slump in farmer sentiment for the March quarter a long, dry autumn in eastern Australia and sliding dairy earnings.
The confidence slip followed a similar trend early last year, and again in spring when severe dry conditions hit southern Australia.
Dairy, cotton and grain producers lead the list of those with concerns about seasonal conditions and global markets.
Cane producers, however, are on a sugar high, with their industry the most positive about market prospects, while overall sentiment was best among beef producers.
Domestic sugar prices are more than $150 a tonne higher than a year ago, and despite extremely volatile markets Rabobank tips a large global production deficit and stockpile reductions this year.
Despite the cane and cattle sector confidence, sentiment in mostly-dry Queensland was lower than other states, all of which fell with the exception of WA where the mood lifted strongly on the back of widespread rain.
While the past month’s rain in south-eastern Australia has brought some good relief, Rabobank national country banking manager, Todd Charteris, said parts of South Australia and northern NSW were still awaiting rain to sow crops and rainfall had been patchy in Queensland.
Many beef and sheep graziers would be feeding stock through winter even if they had received late autumn falls.
“In contrast, the season is off to an excellent start in WA, with many grain producers reporting their best start in more than a decade,” he said.
While rain in the east had come too late in some regions to promote significant pasture growth, the unseasonably warm weather had provided some benefit.
Overall, the survey of 1000 producers found 28pc expected the agricultural economy to improve in 2016-17 - down from the 34pc three months earlier.
Those expecting conditions to worsen had almost doubled to 19pc and income expectations were down overall.
Only 32pc expected higher gross farm incomes (42pc held that expectation last quarter), while 23pc (up from 14pc) felt their incomes would fall, with the biggest downward revision being in the cotton industry.
However, more farmers had a positive outlook than negative.
Current significant challenges facing the dairy sector have weighed heavily on the latest survey results.
“Sentiment in dairy was already low due to the global market downturn and dry seasonal conditions in many dairying areas,” Mr Charteris said.
“The retrospective pay cut, announced by two major dairy processors, has export-oriented producers reeling from the news, as it creates significant cashflow issues in the short-term. “While medium-term global prices are expected to improve, it will take a while to flow back to the farmgate, with producers bracing for low milk prices next season.”
Among those with a positive outlook on the agricultural economy, 62pc cited strong commodity prices as the reason for their optimism.
Investment intentions remained relatively strong, with 87pc of the nation’s farmers expecting to lift or maintain their level of farm business investment in the next 12 months – down slightly from 91pc in March.
Of the 23pc looking to lift investment, half were prioritising on-farm infrastructure such as fences, yards and silos, while 29pc were planning to build livestock numbers.
High property prices and, to a lesser extent, lack of property on the market were reported as the biggest barriers to property expansion.