SA farmer confidence low, but future looks strong: Rabo

SA farmer confidence low, but future looks strong: Rabo

Cropping
SA beef producers had most optimistic outlook of any surveyed commodity sector in the state, according to the latest Rabobank Rural Confidence Survey.

SA beef producers had most optimistic outlook of any surveyed commodity sector in the state, according to the latest Rabobank Rural Confidence Survey.

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SENTIMENT among SA farmers may be low, but the latest Rabobank Rural Confidence Survey suggests the state's long-term prospects remain firm.

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SENTIMENT among SA farmers may be low because of the poor season, but the latest Rabobank Rural Confidence Survey suggests the state's long-term prospects remain firm - reflected in robust farm business investment and strong reported viability.

Dry conditions have taken a considerable toll on local farmers, with the state's rural confidence slumping to its lowest level in 12 months, from a net reading of +16 per cent last quarter to -4pc this survey.

Despite the decline though, optimism among SA farmers still outstrips that of their interstate counterparts.

And regardless of the sharp drop in confidence, the overwhelming majority of farmers in the state - 95pc - still rate their farms as viable.

The latest survey, released today, found half of surveyed SA farmers were expecting little change in economic conditions over the next 12 months, while those with an optimistic outlook dropped to 20pc (down from 37pc last survey).

Almost a quarter (24pc) expected conditions to deteriorate.

As drought conditions creep further across the state, so too has negative sentiment, with 91pc of those expecting operating conditions to worsen blaming the season (up from 79pc last quarter).

The past two seasons have typically been drier across the state, so, with the summer dry spell about to kick in, there's little surprise sentiment is down. - ROGER MATTHEWS

Rabobank SA regional manager Roger Matthews said after having endured two comparatively tough seasons, including limited winter rain and a tight spring, farmers were preparing themselves for a typical dry summer.

"The past two seasons have typically been drier across the state, so, with the summer dry spell about to kick in, there's little surprise sentiment is down," he said.

With the disappointing finish to the season coming off the back of a stellar few years up until 2017, particularly in the South East, historic expectations may also have contributed to the drop in grower sentiment, he said.

The decline in confidence was recorded across all commodity sectors, but particularly beef, where sentiment took a significant hit from last quarter's high.

A total of 30pc of SA beef producers surveyed reported a pessimistic view on the coming 12 months, up from just 8pc with that view last quarter.

That said, 43pc of beef farmers expect conditions to improve - the most optimistic outlook of any surveyed commodity sector in the state.

Confidence in the sheep sector remained relatively steady, albeit at slightly subdued levels, with more than half (56pc) expecting a continuation of current conditions.

Mr Matthews said sheep producers in the SE, where drier conditions can often be more favourable, had benefited from the season.

But the tight spring resulted in a sharp lack of production across many other regions, with low lambing percentages a major contributing factor, he said.

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After a roller-coaster winter cropping season, which began off the back of the driest summer/autumn conditions in a century, just-in-time rainfall had farmers' hopes cautiously raised, but limited spring rain had resulted in only some regions managing to achieve average yields.

Rainfall for the year to-date in some parts of the Eyre Peninsula has been close to a 10-year low, while, in a cruel twist, September frost delivered the final blow across a number of regions.

As such, confidence in the grains industry also deteriorated.

Those SA graingrowers expecting conditions to worsen climbed to 34pc (from 24pc previously) and just 14pc (half of last quarter's 30pc) looked forward to an improvement in the year ahead.

Dry weather was the key factor driving deteriorating confidence in all sectors, however Mr Matthews was confident that the long-term prospects for the region remained strong.

"SA has enjoyed strong past seasons and we have robust, viable businesses that are continuing to seek investment opportunities," he said.

"An escalation in land prices, with property continuing to sell well despite the season, also drives long-term confidence and is indicative of the safe nature of the region."

The survey results reinforce this long-term optimism, as reflected in investment intentions, with almost a quarter (24pc) of surveyed SA farmers looking to increase their investment over the coming 12 months, up from 17pc.

Of those intending to up investment, 44pc said this would be earmarked for property (up from 25pc).

Overall SA producers can see beyond the dry spell and are maintaining a longer-term focus. - ROGER MATTHEWS

While SA farmers are expecting a decline in their own gross farm incomes over the next 12 months, Mr Matthews believed the robust investment figures tell the real story.

"Overall SA producers can see beyond the dry spell and are maintaining a longer-term focus," he said.

"The fact that livestock prices have held up despite the incredibly dry season is a rare phenomenon, and builds enormous optimism. I can't recall such an extensive, dry season as this where livestock prices held strong.

"For those who have retained breeding stock with capacity to rebuild their herd, future prospects remain positive, with prices expected to further increase once the season turns."

Income projections were highest among the state's beef producers, with almost half (49pc) expecting a higher farm gross income in 2020, while sheep producers were also relatively positive about their income prospects, with 37pc expecting an improved financial result in 2020.

Even in the embattled cropping sector, 2019 proved SA's resilience under seasonal pressure.

"To harvest a crop this season off very little in-crop rain came as a surprise, and indicates the potential of the state's agricultural land," Mr Matthews said.

"While summer rain was minimal, fallowed paddocks proved their strength, enabling producers to grow a crop during a very tight season.

"Confidence may be lacking right now as the state's farmers assess the below -average season, but with the very vast majority still confident in the viability of their operation and the region, a break in the season is all that's needed to turn negative sentiment around."

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. It has been conducted since 2000 by an independent research organisation.

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