Strong livestock sector lifts farmer confidence

Strong livestock sector lifts SA farmer confidence in dry season

Dairy
HIGH EXPECTATIONS: Confidence high amongst sheep producers, with 42 per cent of farmers expecting to increase income in next 12 months.

HIGH EXPECTATIONS: Confidence high amongst sheep producers, with 42 per cent of farmers expecting to increase income in next 12 months.

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The healthy state of the livestock sector has boosted confidence amongst SA farmers according to the Rabobank Rural Confidence Survey.

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A healthy commodity price outlook for beef and sheep has boosted confidence among the state’s farmers, particularly those in the South East.

The same could not be said for those in cropping and dairy with the Rabobank Rural Confidence Survey showing a significant number of farmers concerned about the year deteriorating with a significant break in the season yet to be had. 

The latest Rabobank Rural Confidence Survey, released today, found overall sentiment among SA farmers had risen for a third consecutive quarter, with beef and sheep producers particularly confident about the commodity price outlook. 

The survey – completed last month – showed that nearly a third of SA farmers (31 per cent) were anticipating improved economic conditions throughout the next year (considerably up from 18pc last quarter) while 43pc expected conditions to remain stable. 

There was also a slight increase in the number of producers with a negative outlook, with 19pc holding that view this quarter (up from 12pc). 

Rabobank regional manager for SA Roger Matthews said while rural confidence in the state was being pushed higher by livestock producers, it was a different story for those in cropping and dairy. 

“The season’s definitely been patchy, but there has been a decent break in the SE benefiting livestock producers and graingrowers,” he said. 

“For graingrowers (in other regions), the outlook seems less certain.

“While most farmers have got their crop in the ground, rainfall has been patchy, particularly on the Eyre and Yorke peninsulas, and growers are definitely starting to get concerned about the possibility of another dry year.” 

This seasonal variance across the regions was reflected in the survey.

Confidence levels were strongest – and up significantly from last quarter – in the SE, where 35pc of farmers expected conditions in the agricultural economy to improve and only 7pc feared a decline. 

“While beef prices have pulled back a bit over the past 12 months, they seem to have stabilised at still relatively high prices." - Roger Matthews

While on the YP and EP a substantial number of farmers surveyed had a positive outlook on the year ahead (32pc and 23pc respectively), there were also a significant proportion of farmers concerned about the year deteriorating. On the YP, 21pc of respondents were concerned about worsening conditions and 33pc on the EP.  

State-wide, farmers anticipating a declining rural economy in all regions highlighted seasonal conditions as key reason for their concern. Conversely, rising commodity prices were the chief contributor to those farmers expecting an improved year. 

Mr Matthews said the survey had again found confidence to be strongest among the state’s livestock producers, with 38pc of beef and 36pc of sheep producers expecting economic conditions to improve in the coming 12 months. 

“While beef prices have pulled back a bit over the past 12 months, they seem to have stabilised at still relatively high prices,” he said. 

“With the dry conditions we are seeing across a lot of the east coast, sheep numbers were culled quite heavily in April and we saw that push prices down somewhat, but we’re starting to see prices lift a little in line with the normal seasonal trend heading through winter.” 

Despite the lift in overall confidence levels, SA farmers were shown to be feeling a bit more conservative about their income prospects and investment plans for the coming 12 months. 

Most SA producers (55pc) were expecting a similar financial result to last year, while 24pc were anticipating an improvement (down slightly from 28pc last quarter) and 18pc believed their income would be less this year (20pc last quarter). 

Not surprisingly, income expectations were strongest in the sheep sector with 42 pc of sheep producers expecting higher incomes in the coming 12 months, and a further 45pc expecting incomes to remain similar to the previous year. 

SA farmers also had less appetite for investing. Of those surveyed, 17pc indicated they were looking to increase their investment over the next 12 months, down from 25pc with that intention in the previous survey. 

Mr Matthews said while there were still plenty of livestock and cropping producers in a position to invest, the rapid increase in property prices had likely contributed to subduing investment intentions. 

“We’ve seen a steep rise in land prices over the past two years, particularly on the back of strong livestock and wool prices, but also the impact of prior price highs across the grain complex,” he said. 

“While some of these prices, particularly the chickpeas and lentils, have pulled back, the land values have remained elevated at these higher prices. We may see investment plateau for a while before kicking off again.” 

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