VICTORIAN farmers are taking a more pessimistic outlook on the year ahead, despite the state currently enjoying “generally good” seasonal conditions in most areas, the latest quarterly Rabobank Rural Confidence Survey has found.
Though down on last quarter, the decline was relatively small compared to falls in rural confidence seen in other states this quarter, with Victorian farmers also more positive than the rest of the nation.
The survey, released this week, found net rural confidence in the state had declined from -24 per cent last quarter to -31 per cent, with 44 per cent of Victorian farmers now expecting business conditions to worsen in the coming 12 months (up from 37 per cent with that view in the previous quarter).
And, while 42 per cent expect agricultural economic conditions to stay the same, only 13 per cent of farmers anticipate an improvement (unchanged from quarter two).
The chief cause for concern for those Victorian farmers expecting agricultural business conditions to decline was lower commodity prices – nominated by 75 per cent of those with a pessimistic view on the year ahead (up from 58 per cent in the previous quarter).
The prospect of deteriorating seasonal conditions was also a growing worry for those with a pessimistic outlook – cited by 21 per cent the survey (up from 12 per cent previously).
Of those Victorian farmers expecting the agricultural economy to improve in the coming 12 months, commodity prices were instead cause for optimism – with rising commodity prices identified as a driver of positive outlook by 66 per cent.
Rabobank head of relationship management for southern Victoria and Tasmania Daker Pern said while farmers across much of the state had enjoyed a strong start to the season, they were now very aware of the potential of drier conditions ahead, and the outlook would be weighing on their minds.
“In terms of the seasonal outlook, it’s the potential of what may happen – not what is actually happening – that has Victorian producers concerned,” Mr Pern said.
Victorian grain producers are the most optimistic of all the state’s farmers, with 73 per cent anticipating agribusiness conditions to improve or remain unchanged in the year ahead (up from 50 per cent previously).
Mr Pern said farmers were apprehensive about how the season would “finish” in grain growing regions.
“Grain markets are reasonably steady at present and growers have had a good season to date, but they are now worried about weather forecasts and what the finish to the season might look like,” he said.
Beef and sheep producer confidence has been impacted by softening commodity prices this quarter.
Of the 40 per cent of Victorian beef producers who are now expecting the agricultural economy to worsen in the next 12 months (up from 18 per cent in the previous quarter), 76 per cent cited falling commodity prices as their major concern.
Mr Pern said livestock producers were dealing with a “double whammy” of easing commodity prices and the prospect of a drier year ahead.
The survey found of the 61 per cent of the state’s sheep producers this quarter who were expecting the agricultural economy to worsen (up from 53 per cent in the previous survey), 89 per cent held concerns about falling commodity prices.
Overall, this quarter more Victorian farmers are looking to decrease investment in their farm business in the coming year – at 21 per cent (up from 16 per cent previously).
“While farmers are refocusing their investment plans, we are noting an increased interest in spending on infrastructure that will deliver labour and/or energy efficiency,” Mr Pern said.
Of those Victorian farmers expecting to boost their investment, there was increased appetite for on-farm infrastructure – such as fences, yards and silos (at 78 per cent, up from 62 per cent in quarter two), property purchases (33 per cent, up from 23 per cent), and irrigation/water infrastructure (29 per cent, up from 20 per cent).
Debt was expected to increase, with 18 per cent of Victorian farmers surveyed indicating they expected their debt to rise (up from 12 per cent in quarter two) and 21 per cent expecting to decrease debt (down from 31 per cent).
And of those Victorian farmers planning to increase their debt, the proportion looking to use borrowings for working capital decreased from 26 per cent to 18 per cent while the proportion wanting to expand their farming operations increased from 19 per cent to 24 per cent.
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 next results are scheduled for release in December.
