A wet winter has done marvels for Australia’s farm sector mood, dramatically lifting farmer optimism, except in Tasmania where crashing milk prices and too much rain have hurt.
Most notable, after 18 months or more in the doldrums, is Queensland optimism, now the strongest in the nation thanks to the best rain in several years in some areas.
Although cautions about being too upbeat, agribusiness bankers are describing the current seasonal and economic outlook as the best in almost 20 years for many farmers.
The downside is oversupplied world dairy and grain markets and depressed prices.
“The planets have really aligned for beef and sheep producers,” said Rabobank national manager Country Banking Australia Todd Charteris, who also noted surging cotton and sugar sector confidence.
Sugar prices are up 75 per cent on 12 months ago to more than $550 a tonne.
Rabobank’s latest national survey of agricultural sector sentiment shows 37pc of farmers expect ag economy conditions to improve, compared with 28pc three months ago.
Only 16pc see the outlook declining.
Overall, 36pc of farmers expected higher gross farm incomes this financial year than in 2015-16, and 51pc reported higher gross incomes last financial year than 2014-15.
Seasonal conditions were viewed as the primary reason for confidence by 64pc of farmers with positive expectations, while commodity prices were also a factor for 58pc (down slightly since June).
National Australia Bank’s (NAB) agribusiness economist, Phin Ziebell, said winter was “kind to most producers”, particularly in broadacre crop and livestock industries.
“Overall, the outlook for Australian agriculture remains generally very robust, with a mostly very favourable season and good prices for many - but not all - commodities,” he said.
Strong cattle and lamb prices underpinned NAB’s Rural Commodities Index which jumped 4.6pc in June and a further 1.3pc in July in Australian dollar terms, translating to 6.7pc and 3pc gains in US dollars.
The index covers 28 Australian commodities from cereals and pulse crops to wool, winegrapes, beef, bananas and broccoli and is weighted on gross production values for each industry.
Mr Ziebell said prices remained generally favourable, although dairy was still under pressure and wheat’s outlook continued to slide, reflecting strong global production.
However, regardless of poor export price prospects and the lowest domestic grain prices in five years, Rabobank reported grains sector sentiment lifting on the back of above average winter crop yield expectations and prospects of summer croppers enjoying good starting conditions.
Rabo’s Mr Charteris said cotton prices were trading above the magic $500 a bale and irrigation water storages were rising.
Commonwealth Bank of Australia’s NSW agribusiness general manager, Tim Harvey, believed his state’s farmer clients were probably, the most optimistic across CBA’s national agribusiness segment.
“Despite the air of uncertainty about cereal markets, they’re telling us this is the best situation they’ve seen since about 1989 - good livestock prices, a good season, improving dam storage levels, and pulse crop prices are very strong.”
Conversely, while NSW was recording CBA’s best regional gross product growth, the bank’s agribusiness executive general manager, Geoff Wearne, said Queensland remained flat, especially in areas where mining activity had subsided.
Rabobank’s survey also showed while Queensland farmer optimism hit a 15-year high after large swathes of the state scored good early July rain, much remained officially in drought and follow-up rain was critical to sustain confidence.
Expensive cattle markets also made it hard for beef producers to rebuild herds.
Too much wet weather and floods in Tasmania combined with poor dairy prospects to weigh the island state’s normally buoyant mood down to a three year low.
Nationally, dairy sector confidence slumped to one of its lowest levels in 15 years, but NAB’s weighted dairy export indicator did record a 3pc lift in June to $3132/t, the second straight month of improvement, before dipping again to $3083 in July.
The February 2014 high was $5436/t.
NAB does not expect marked improvements in Chinese milk powder demand, or reduced European or US supplies or a Russian return to the market in the coming year, and therefore tips global prices will be low for the foreseeable future.
