Rabobank Australia CEO Peter Knoblanche. Image Rabobank
Australian producers continue to ride the rollercoaster of seasons, commodity prices and economic factors, with rural sentiment at the start of 2023 dipping to its lowest level reported since late 2018.
The latest quarterly Rabobank Rural Confidence Survey, released today, found after rallying late last year, sentiment in the rural sector had fallen again this quarter as producers continue to navigate a range of economic and financial uncertainties.
Western Australia and Tasmania, however, bucked the national trend, with producers in those states looking to the year ahead with increasing optimism.
The latest Rabobank survey, completed last month, found, nationally, the number of producers expecting the agricultural economy to improve over the coming 12 months dipped to 11 per cent in the first quarter of 2023, compared with 15 per cent in December 2022.
Although just over half of Australian producers continue to expect business conditions to stay the same (51 per cent, marginally up on 50 per cent), more are anticipating conditions to worsen (36 per cent, up from 31 per cent).
The main factor driving those with negative outlook is falling commodity prices, a worry for 68 per cent of those expecting conditions to worsen, a significant increase on 21 per cent previously, while rising interest rates were also an increasing concern (20 per cent, up from 11 per cent).
While not currently ranked as a major driver of negative outlook, there were also signs emerging of a growing concern about a return to dry conditions. There was some relief though around the high cost of farm inputs – such as fuel, fertiliser and energy – but this remains a concern for 35 per cent of producers expecting conditions to worsen over the next 12 months (down from 49 per cent last quarter).
Commodity prices were also, though, still cause for optimism among those producers with a positive view on the year ahead.
There was increased confidence in overseas markets/economies contributing to good economic conditions – nominated by 26 per cent as cause for their positive outlook (up from 18 per cent).
Rabobank Australia CEO Peter Knoblanche said the latest survey reflects the combination of commodity prices, global economic challenges and high production costs facing farm businesses.
“Despite having their resilience tested throughout 2022, most Australian producers ended last year on a high, buoyed by seasonal conditions and high commodity prices which saw our industry break farm production value records for the third year in a row,” he said.
“However, as we see the heat come off many commodities – albeit down from significant highs – producers recognise conditions will start to return to more ‘normal’ levels. “This survey captures their realistic expectations that commodity prices will likely not return to the highs this year that we saw in the previous 12 months.
“Although there’s relief with some input prices easing, the anticipation of further interest rates hikes will continue to place pressure on farm budgets.”
Underpinning these economic drivers is the emergence of fresh seasonal concerns, as producers move away from the wet conditions which benefited many in 2022. This survey, 13 per cent of producers with a negative outlook reported being concerned about drought, up from just two per cent with that concern in the previous quarter.
Likewise, concern around too much rain fell from 32 per cent to just six per cent. And for those producers with a positive outlook, 38 per cent attributed this to good seasonal conditions in the latest survey, down from 57 per cent at the end of last year.
“The, at times, excessive rain in 2022 did set up our nation’s grain producers for record harvests and maintained beneficial feed base conditions for livestock businesses through summer, but again, we see the realistic expectations that 2023 won’t present the same conditions,” Knoblanche said.
Nationally, Western Australia and Tasmania were the only states to record an uptick in confidence for the year ahead. Although rising interest rates, hand-in-hand with falling commodity prices, were still on WA producers’ radars, they were buoyed by their second consecutive record-breaking winter grain crop.
Likewise, positive seasonal conditions through summer also boosted Tasmanian farmer confidence in the year ahead despite the economic factors at play.
However, despite a record harvest for many though, South Australian producers started 2023 with lowered confidence, eroded by falling commodity prices and rising interest rates.
Victorian and NSW rural sector confidence also dipped, driven down by harvest delays in the aftermath of last year’s excessive rain, and – once again – compounded by easing commodity prices and interest rates.
Are you a Daily Wine News subscriber? If not, click here to join our mailing list. It’s free!
