Australian farm viability hits 20-year high – Rabobank

Confidence among farmers is strong after a bumper 2020 winter crop, with hopes that a repeat this year will set the sector up for years to come.

Australia’s agriculture sector is shaping up for another bumper year, with strong commodity prices and favorable climatic conditions at the start of the winter crop season leading to high confidence levels in the latest edition of the quarterly Rabobank Rural Confidence Survey.

The survey found that more than 90 percent of farmers expect business conditions to either continue or improve in the 12 months ahead.

This figure comprised 35 percent of respondents who felt that conditions would improve, down slightly from 39 percent in the first quarter, and 54 percent who felt that conditions would remain at the current level. Only 8 percent of farmers felt that conditions would deteriorate.

Rabobank Australia CEO Peter Knoblanche said the dip in respondents who felt conditions would improve “was likely a reflection of the view among some that business conditions in agriculture [in Australia] are about as good as they get”.

Sentiment was found to be strong in all states and across all sectors of the agricultural economy, with beef, lamb and dairy producers particularly enthused by high commodity prices, and cotton and grain producers buoyed by strong weather conditions.

In addition, Rabobank’s Farm Viability Index – a measurement of farmers’ assessments of their own business viability – reached its highest level in 20 years.

“There is certainly a view out there among farmers that business conditions right now are excellent. Many would say it’s as good as it gets, and they can’t see how they could get any better,” Knoblanche said in a statement.

“Strong prices for grain and terrific growing conditions in most regions have driven another near-record winter crop planting program across the country, with early estimates of a second straight year of bumper tonnages of wheat, barley and canola when harvested at the end of the year.

“Meanwhile commodity prices in the beef and lamb sectors are also supporting producer confidence, with low supply and high demand for protein pushing prices to levels not seen before. And dairy confidence is also strong on the back of favorable milk price contracts and improved water allocations.”

Investment and business performance

The survey found that farmers’ forecasts for business performance remained strong for the year ahead despite the slight dip in those who thought conditions would improve, with 40 percent of farmers expecting a rise in farm incomes over the next 12 months. A further 45 percent expected similar incomes to last year.

Knoblanche said this combination of strong recent performance and positive forecast performance meant farmers were making longer-term investment plans. Almost a quarter of those making investments were seeking to increase the size of their properties through acquisitions.

The survey found 60 percent of farmers will maintain business spending at current levels, while 34 percent intended to increase investment. The most common areas for planned spending were upgrades to equipment and on-site infrastructure, as well as livestock purchases.

The 2021 calendar year is shaping up to be a pivotal year for Australian agriculture, Knoblanche said.

“The benefit of another year like this for Australian farming shouldn’t be underestimated. This will allow many farmers to really consolidate their position after many years of drought – to further reinvest in their businesses to make them more efficient and resilient, and to expand and grow their businesses for the future.

“This is a sector that has made an excellent recovery after the drought and is helping power the nation through the challenges of the covid-19 pandemic.”

Rabobank conducts its Rural Confidence Survey every quarter and questions an average of 1,000 primary producers across a range of commodities and geographies to collate its findings.