THIS year is off to positive start for SA’s rural sector, with the state’s farmers reporting growing confidence in their prospects for the year ahead.
The latest quarterly Rabobank Rural Confidence Survey, released today, found overall sentiment has continued to improve in the sector in SA, with growing confidence among sheep and grain producers outweighing concerns of those in the beef and dairy industry.
The survey – completed last month – found farmer sentiment in the state had improved for the third consecutive quarter and was in positive territory.
While most of the farmers surveyed (69 per cent) had a stable outlook for agriculture in the year ahead, 18pc expected an improvement (up slightly from 15pc with that view last quarter). The percentage with a negative outlook had also declined – to 12pc (from 19pc previously).
Rabobank regional manager for SA Roger Matthews said following last year’s dry start to the season, farmers were now feeling cautiously optimistic of a return to normal seasonal conditions.
“We’ve had a long, hot and dry summer, but that is pretty normal for SA,” Mr Matthews said.
“What growers will be waiting on is that seasonal break that usually happens around Anzac Day, to enable optimum planting or growing conditions, as the case may be.
“Last year had a bit of a mediocre start, particularly for the Eyre and Yorke Peninsulas, and, while most of the Yorkes made a decent recovery, there were a number of growers on the EP who missed getting a full crop sown.”
With a new cropping season on the horizon, both EP and YP farmers have recovered from the significantly negative sentiment they reported in the middle of last year, with more growers anticipating improving economic conditions this year.
In the South East region, sentiment has pulled back slightly, but remains in positive territory.
The improved outlook among SA farmers was largely underpinned by commodity prices this quarter, with 64pc of the survey respondents who were expecting conditions to improve in the agricultural economy citing commodity prices as cause for their optimism (compared with 62pc last quarter).
Sheep and grain producers hold the most positive outlook in SA, with the majority of those surveyed highlighting commodity prices as a key reason for improved sentiment.
“Lamb and wool have had a bit of a record run and have enjoyed some strong fundamentals in the market for almost three years now,” Mr Matthews said.
“Despite an increase in domestic production, lamb and wool prices are expected to remain strong in 2018.
“Export demand has continued to climb, with China being a major player. Exports to China of Australian lamb grew by 24pc in 2017, while wool exports also grew 8pc despite China already being Australia’s biggest market for wool.”
Confidence among sheep graziers has lifted this quarter along with this positive market outlook, with 24pc expecting conditions to continue to improve in 2018, increasing from 20pc last quarter, while a further 73pc were anticipating a similar year to last and only 4pc thought conditions might deteriorate.
Meanwhile confidence was down in the beef sector, with just 6pc expecting an improvement in their economy this year, down from 25pc last quarter.
Conversely, 36pc of beef producers held a negative outlook on the year ahead, up from only 9pc last quarter, while 58pc expected stable conditions.
Among the state’s dairy producers, confidence was also down, with almost two thirds of those surveyed expecting worsening conditions in 2018.
Falling prices were the chief concern of both beef and dairy – cited by 72pc of beef producers and 66pc of dairy farmers with a negative outlook.
“We have been seeing projections for some time that there will be continuing downward pressure on beef prices this year as domestic and global stocks continue to rebuild,” Mr Matthews said.
“That said, confidence among beef producers in SA is coming down from a high level after experiencing an excellent season, coupled with strong prices, in 2017.”
Income projection and investment intentions both picked up among SA producers this quarter, in line with the uptick in overall confidence levels.
More of the state’s farmers now expect their gross farm income to improve (28pc) rather than deteriorate (20pc) in the year ahead, while 53pc expect a similar financial result to the previous 12 months.
Reflecting the long-term confidence in the sector, Mr Matthews said, the proportion of farmers with an appetite to increase their investment had also grown this quarter, and was sitting at 25pc (from 22pc last quarter). Meanwhile, a total of 67pc were looking to maintain their present investment levels and only 8pc were looking to decrease their exposure.
“We’re seeing the biggest appetite for investment presently coming from those in the sheep industry with significant interest spreading across property acquisition, on-farm infrastructure and the adoption of new technologies,” he said. “However, the grains industry is not far behind and if we were to get those breaking rains we’d fully expect those in cropping to be quite aggressive in their investment intentions by the next quarter.”
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 Rabobank Rural Confidence Survey has been conducted since 2000 by an independent research organisation. The next results are scheduled for release in June.
