Farmer confidence plummets

Rising input costs and fallout from the war in Ukraine dragged down farmer confidence for a third quarter.

The results of Rabobank’s latest rural confidence survey show optimism around high commodity prices and another bumper grain harvest has been clouded by the rising cost of agricultural inputs like fertilizer and fuel and other inflationary pressures.

But as optimism has waned in some states, Western Australia’s appetite to invest in their agricultural businesses has grown, with Western Australian farmers having the strongest intentions in the country to buy new properties.

Overall trust levels slipped in Queensland, New South Wales and Tasmania.

While confidence in the Victorian agricultural sector has risen slightly in the face of rising costs thanks to high beef and dairy prices, a dry start to the cropping season in South Australia has had little impact on the trust there.

The report surveys 1,000 primary producers and shows that half of Australian farmers surveyed believe the ongoing conflict in Ukraine will negatively impact farming businesses, citing rising input costs as a main concern.

A quarter thought it would have a positive impact on the market due to reduced supply which would keep commodity prices high. This view was strongest in the grain sector.

Farm income projections for the next 12 months remain stable, while the number of farmers looking to increase their investments decreased slightly this quarter.

The survey found that 28% of Australian farmers now expect trading conditions to improve over the next 12 months, down 3% from the previous quarter, while 16% expect to a deterioration in conditions, compared to 14%.

More than half expect economic conditions to remain stable over the coming year.

This marks three consecutive quarterly declines in net rural confidence and brings farmer sentiment back to levels last seen in June 2020, following the first pandemic lockdown.

Confidence is highest in the cotton and cereals sectors, and very strong among dairy producers, with high prices and excellent seasonal conditions in all three sectors.

Confidence in the livestock sector has eased, but strong commodity prices are helping to stabilize sentiment.

Sheep farmer confidence dipped slightly from last quarter, while investment intentions and farm income projections also declined.

Sentiment was mixed in the sugar sector, with producers expecting conditions to improve, stay the same or deteriorate.

Peter Knoblanche, managing director of Rabobank Australia, said many farmers had benefited from high crop prices and excellent seasonal conditions for more than two years, but rising input costs had reduced profits.

He said many have invested in new technology, machinery and equipment.

“The benefits of these investments are certainly helping farmers create efficiencies, but the cost pressure is not diminishing and producers certainly need these higher commodity prices to meet the rising input costs,” he said.

The latest survey found that the main driver of optimism among farmers with a positive outlook was the expectation that commodity prices would continue to rise.