Australian confidence declines as crop forecasts revised down

Rabobank found that 41% of farmers thought agricultural conditions would worsen in the coming 12 months, after ABARES revised down its winter crop forecast for 2019-20 by 13%.

Drought is continuing to negatively affect sentiment among Australian farmers, a report from Rabobank has found. This comes a week after forecasts from the Australian Bureau of Agricultural and Resource Economics and Sciences predicted that the winter crop for 2019-20 would be the lowest in more than a decade.

In its quarterly Rural Confidence Survey, Rabobank noted that sentiment in the sector was at a 15-month low, recording the sixth-lowest reading in the survey’s 18-year history.

Of the 1,000 farmers surveyed, 41 percent expected agricultural economic conditions to worsen over the next 12 months (up from 30 percent recorded in September), with 31 percent expecting conditions to stay the same and only 17 percent believing they would improve.

Rabobank said strong demand and continuing high prices for several agricultural commodities such as beef, sheepmeat, wool and grains helped confidence remain higher than it was at the height of previous droughts in 2002 and 2006.

The bank also found that confidence was down in all states of Australia except Queensland – where it was subdued, as it had been during the previous quarter.

Confidence had also declined in all commodity sectors. Cotton producers were particularly pessimistic, as sentiment reached a six-year low due to little-to-no water allocations for many and high water prices in the Murray-Darling Basin.

The survey also found farmers were likely to ease investment in their operations over the next 12 months, with 19 percent saying they would reduce on-farm investment in the coming year, up from 14 percent last quarter.

Rabobank CEO Peter Knoblanche said the hot and dry weather, which the Bureau of Meteorology has forecast to continue, was playing on farmers’ minds.

“The survey, which was completed in November, found drought concerns were particularly heightened in New South Wales, with 99 percent of farmers who had a negative outlook blaming the season for their pessimism,” he said in the report.

“But concerns about weather spread across all states, with drought emerging as the primary reason nationally for farmers expecting economic conditions to worsen in the year ahead.”

At the beginning of December, ABARES revised down its forecast for winter crop production for 2019-20 by 13 percent from figures it published in September. The new forecast predicts that crop production will be 29.4 million tonnes for that period, which would represent a fall of 3 percent from 2018-19’s figure of 30.4 million tonnes.

The forecast figure is around 10 percent lower than the 10-year average and will be the third consecutive year of falling production following a record high in 2016-17.

Production is actually forecast to increase year-on-year in New South Wales, Victoria and South Australia, with a small decline in Queensland. Western Australia, though, would see production fall from last year’s bumper figure of 17.7 million tonnes to 11.6 million tonnes, thereby accounting for most of the overall projected decline.

ABARES said the “unfavorable conditions” in WA and southern NSW were the “most significant” factors in reducing national production prospects.