Ag's mood buoyant in south and WA, but dives in dry areas

Farmer mood buoyant in south and WA, but dives in dry areas

Agribusiness
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Dairy farmer confidence is mostly booming again, and croppers in Victoria and WA are poised for bullish harvest results

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While drought is wreaking havoc for most eastern Australian croppers and causing a big fall in national milk production, dairy farmer confidence is booming again, and areas of Victoria are poised for near-record grain harvests.

Latest rural confidence survey results from Rabobank show the farm sector mood being hammered by the big dry, but at the same time sentiment is rising in Western Australia, Victoria, South Australia and Tasmania.

National Australia Bank also reported a lift in overall agribusiness conditions for the first time in two years on its charts, thanks to an uptick in southern and western seasonal conditions and good lamb prices.

NAB's August agribusiness index of sales and turnover conditions, employment and profitability, as assessed by its rural bankers, lifted nine points to minus 11.

However, agribusiness bankers had serious concerns about the prolonged drought's impact in NSW and to a lesser extent Queensland.

National Australia Bank's index of agribusiness conditions nationally - up nine points for August.

National Australia Bank's index of agribusiness conditions nationally - up nine points for August.

More than 95 per cent of NSW and 65pc of Queensland are drought declared and the prospect of low or zero water allocations looms large for most irrigators.

A distinct national divide had emerged in farmer confidence levels, said Rabobank Australia chief executive officer, Peter Knoblanche.

"Drought conditions in eastern Australia remain extremely challenging as farmers continue feeding stock at a high cost, while prospects for summer grain crops and cotton look bleak, unless good rains fall in the coming weeks," he said.

The bank's quarterly survey of 1000 farmers showed the divide was particularly evident in the grain sector with Victoria's Wimmera on track for one of its best seasons and WA grower confidence finding higher ground following good June rain.

Sentiment then plunged among growers in NSW and Queensland, where winter crop prospects were poor and the outlook for a summer crop also depressing.

Interestingly, dairying delivered the most dramatic confidence U-turn, now outstripping all other commodity sectors surveyed by Rabobank.

Strong commodity markets, low interest rates and the weaker dollar will aid with recovery, but it is only rain that can materially change the outlook - Peter Knoblanche, Rabobank

Nationally, net confidence leapt to 22pc - up from minus one in the June quarter.

The uplift was largely driven by southern Victorian and Tasmanian milk producers reporting strong profit projections and investment plans for 2019-20.

Mr Knoblanche said while farmers knew rain would come, "it will take time to rebuild from this drought - particularly in those regions affected for such a long period".

"Strong commodity markets, low interest rates and the weaker dollar will aid with recovery, but it is only rain that can materially change the outlook," he said.

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Nationally, the percentage of farmers feeling positive about the outlook for the agricultural economy this financial year eased back slightly from 27pc to 25pc, while those with a pessimistic outlook crept up to 30pc.

Two in every five NSW farmers expected conditions to worsen.

Australia-wide, a steady 35pc expected little change in current conditions.

Investing plans

However, on-farm investment intentions remained strong nationally, with 66pc of survey respondents looking to maintain their current level of farm business investment in the year ahead and 17pc beefing up investment plans.

Tasmanian and WA farmers had particularly strong investment appetites, with 26pc and 22pc respectively planning greater farm investment.

A quarter of farmers expected improved gross farm incomes, while those expecting weaker results increased slightly to 34pc.

Agribusiness bankers identified their strongest performing customers were in lamb and mutton, followed by mixed cropping and livestock, and wool - Neil Findlay ,National Australia Bank

NAB's agribusiness customer executive, Neil Findlay, agreed overall capital expenditure plans were heartening, jumping from minus 26 on his bank's index late last year to plus one in August, although NSW and Queensland were in decline.

About 60pc of NAB bankers tipped farmland prices to increase, with the majority expecting up to 5pc rises, but 20pc forecast values to fall in 2019-20.

He said confidence among farm sector customers varied considerably, but overall had slipped from positive territory early this year to minus two.

National Australia Bank's expectations of farmer capital expenditure.

National Australia Bank's expectations of farmer capital expenditure.

About 20pc of his bankers said weather conditions had the most impact on customers' mood.

"NAB agribusiness bankers identified their strongest performing customers were in lamb and mutton, followed by mixed cropping and livestock, and wool," Mr Findlay said.

Dairy leads the way

Rabobank's Mr Knoblanche said confidence in dairy conditions now outstripped other sectors, while sentiment was relatively stable in beef, easing in grain and sheep and much lower for cotton and sugar.

Talk suggested a 2019-20 cotton crop below 1 million bales.

"In dairy, it's a tale of two halves, with those in the southern dairy regions much more positive than those buying in water and feed, the cost of which is outweighing milk price improvements," he said.

Almost two thirds of dairy farms in Victoria and Tasmania expected a higher gross income in 2019-20.

Crop curtailed

Despite good prospects for much of Victoria's grain crop, a poor start to the season across most of Australia had curtailed wheat harvest potential to about 18 million tonnes.

"Even WA, which received a June reprieve is looking at a wheat crop that could be down by more than 26pc," Mr Knoblanche said.

Among sheep producers there was real concern emerging with the sharp drop in wool prices.

"While many didn't expect wool prices to remain at historical highs, it is how sharply the market has fallen, and how the market will continue to react to developments in the US-China trade war, that has graziers worried."

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The story Ag's mood buoyant in south and WA, but dives in dry areas first appeared on Farm Online.

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