Rain and better commodity prices boost farmers’ confidence levels: Rabobank

Agribusiness financier Rabobank has found Australian farmers’ confidence has recovered in line with more rain and better commodity prices.

The latest Rabobank Rural Confidence Survey found sentiment among the nation’s agricultural producers had improved.

Confidence has returned to Australia’s farming sector heading into spring as more favourable livestock markets, much needed rain in some cropping areas and a potential La Nina weather system fuels renewed optimism.

The latest Rabobank Rural Confidence Survey found sentiment among the nation’s agricultural producers had improved, but farm sector confidence remained just shy of net positive levels – with slightly more farmers still holding a pessimistic outlook than those expecting a better year ahead.

Farmers began 2024 with a surge in optimism, but sentiment fell mid-year due to the late – and in some cases absent – start to the autumn break which heralds the first significant rainfall event in many winter cropping regions, especially in Western Australia and South Australia.

However, good rainfall in the west and along the eastern seaboard put the brakes on sliding seasonal confidence in the third quarter.

The rural and agribusiness bank said there were signs that a La Nina weather system may develop later this year, with the potential for a wetter spring, while improved prices for sheep and beef producers supported a better outlook for farmers.

Confidence improved in every state, although only NSW and Tasmania recorded net positive sentiment, with more farmers expecting conditions to improve than deteriorate. Confidence also lifted in all segments of the commodity sector, except for cotton.

Many cropping regions have recorded in good winter rains.

Rabobank group executive for country banking Australia, Marcel van Doremaele, said more promising market signals, particularly in the livestock sectors, along with positive seasonal conditions and production outlooks in many parts of the country had resulted in farmers taking a more bullish view overall this quarter.

“Although some parts of the country are still grappling with the impacts of unusually dry weather through autumn and winter, it’s encouraging to see the patchy start to this year’s season have been corrected in many farming regions – especially in WA, where seasonal conditions looked dire last quarter but have really turned around,” he said.

“Farmers are still managing challenging conditions in southwest Victoria and across South Australia, which continue to put pressure on winter crops and feed for livestock. And grain growers in these regions are particularly holding hope for good spring rainfall to finish crops following the very dry winter.”

The survey, completed last month, found the proportion of Australian farmers expecting the agricultural economy to improve in the coming 12 months had increased to 23 per cent – up from 15 per cent in the previous quarter.

And fewer respondents (27 per cent) were now expecting conditions to worsen (down from 36 per cent). A similar proportion to last quarter (47 per cent) had a stable outlook for the year ahead, expecting the agricultural economy to remain the same.

While drought remained the leading worry for farmers – nominated by 31 per cent – this was down on 37 per cent last quarter.

There was also less concern about rising input costs (cited by 29 per cent, down from 35 per cent) and falling commodity prices (22 per cent, down from 32 per cent).

Interest rate worries remained stable quarter-on-quarter, although there was increasing concern following the an­nounce­ment in July that live exports of sheep will end in May 2028.

Australian farmers also reported a slight increase in desire to invest in farm businesses this quarter. More planned increasing their level of investment in the year ahead (24 per cent, up from 21 per cent last quarter) though 14 per cent intended to invest less (compared with 13 per cent previously).

More farmers also expect their farm incomes to increase over the next 12 months – 30 per cent (up from 21 per cent last quarter) – while the number expecting a lower income had declined to 27 per cent (from 32 per cent).

“Despite seasonal variability, the outlook for Australian agriculture this financial year is for growing production value, and average incomes for broadacre farms are anticipated to increase in 2024-25,” Mr van Doremaele said. “This … supports farmers’ confidence in investing.”

Commodity prices have improved.

There was also less concern about rising input costs (cited by 29 per cent, down from 35 per cent) and falling commodity prices (22 per cent, down from 32 per cent).

Interest rate worries remained stable quarter-on-quarter, although there was increasing concern following the an­nounce­ment in July that live exports of sheep will end in May 2028.

Australian farmers also reported a slight increase in desire to invest in farm businesses this quarter. More planned increasing their level of investment in the year ahead (24 per cent, up from 21 per cent last quarter) though 14 per cent intended to invest less (compared with 13 per cent previously).

More farmers also expect their farm incomes to increase over the next 12 months – 30 per cent (up from 21 per cent last quarter) – while the number expecting a lower income had declined to 27 per cent (from 32 per cent).

“Despite seasonal variability, the outlook for Australian agriculture this financial year is for growing production value, and average incomes for broadacre farms are anticipated to increase in 2024-25,” Mr van Doremaele said. “This improvement in income supports farmers’ confidence in investing back into their business.”

Originally published as Rain and better commodity prices boost farmers’ confidence levels: Rabobank