Farmer confidence at near-decade lows

09 Dec, 2018 04:00 AM
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CHALLENGING TIMES: The latest Rabobank Farmer Confidence survey has found dairy farmers are facing particularly challenging times.
61 per cent of surveyed dairy farmers reported a pessimistic outlook, up from 47pc in the September.
CHALLENGING TIMES: The latest Rabobank Farmer Confidence survey has found dairy farmers are facing particularly challenging times.

Dry seasonal conditions across northern Victoria and east Gippsland continue to take their toll on the state’s rural sector, with Victorian farmer confidence remaining subdued at near-decade lows.

The final Rabobank Rural Confidence Survey for 2018 found half of the state’s farmers are pessimistic about their prospects for the year ahead, with drought the primary concern.

Southern Victoria and Tasmanian general manager Hamish McAlpin said circumstances were particularly challenging for those in the dairy sector

He said 61 per cent of surveyed dairy farmers reported a pessimistic outlook, up from 47pc in the September quarter.

“The dry season has increased the requirement for, and the cost, of bought-in feed and water for dairy farmers, particularly in the Murray Dairy region with input prices around double that of last year and little relief for margins foreseen in 2019,” Mr McAlpin said.

In the south-west of the state and west Gippsland, Mr McAlpin said, it had been a dry start to spring

But there had been some good rainfall in recent weeks and milk production was largely on par with last year.

With sentiment in the state’s dairy sector lagging other commodities, Mr McAlpin said confidence was also found to be relatively subdued in grain, beef and sheep – albeit tracking above last quarter’s levels.

“The dry start to spring and a series of frost events have taken their toll on the grains crop, with quite significant frost damage reported in areas west of Ballarat and around Horsham,” he said.

“But thankfully, frost-damaged crops that have been cut for hay have still been able to realise good returns.”

Mr McAlpin said Victoria’s winter crop was expected to be down around 40pc on last year’s strong harvest result.

Incentivised by high fodder prices, upwards of 50pc of planted area will not be harvested for grain in the Wimmera and Northern Central region, he said.

Tight grain supplies meant the cost of feeding livestock was weighing on beef and sheep producers.

“The decisions facing graziers are becoming tougher, as many have already made decisions around the sale of older or younger stock, and are now weighing up whether to sell breeding animals,” he said.

With little change in overall confidence levels, farmers’ expectations about their gross farm incomes also remained relatively in line with last quarter.

A total of 43pc of Victorian farmers surveyed were expecting their incomes to fall in the coming year (up slightly from 38pc in the previous survey), while 36pc expected similar incomes to the past 12 months.

Those expecting an improved financial position stood at 22pc, the same percentage as last quarter.

Longer-term confidence in the Victorian sector remained relatively sound, however, as reflected in farmers’ investment intentions for the coming year – with 17pc looking to increase their investment, and the majority (67pc) planning to maintain current levels.

While late-spring rains – which have since fallen across much of eastern Victoria – are expected to now provide some reprieve, follow-up rainfall will be needed to help restore confidence in the sector.

Despite ongoing seasonal concerns, 95pc of surveyed farming businesses in Victoria indicated a level of preparedness for drought – with more than half stating they are more prepared now than five years ago.

The latest survey, completed in November, found rural sentiment in the state was little changed from last quarter, with 50pc of those Victorian farmers surveyed expecting conditions in the agricultural economy to worsen in the next 12 months, compared with 51pc in the previous survey.

Drought remained the key driver of this pessimistic sentiment, cited by 94pc as the reason conditions were likely to deteriorate.

Those expecting conditions in the agricultural economy to improve stood at just 18pc (up slightly from 14pc) while 28pc expected similar conditions to the previous 12 months.

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