Confidence of Farmers Waning?

Article by: Hari Yellina

According to the latest study, farmer morale is eroding as input costs rise and the situation in Ukraine has an impact on Australia’s agricultural economy. For the third quarter, farmer confidence has declined due to rising input costs and the consequences from the Ukraine conflict. The latest Rabobank rural confidence survey shows that excitement about strong commodity prices and another big grain harvest has been tempered by rising farm input costs such as fertiliser and petrol, as well as other inflationary pressures. While optimism has waned in other states, Western Australian farmers have boosted their willingness to invest in their agricultural companies, with WA farmers having the strongest plans to buy new land in the country.

Queensland, New South Wales, and Tasmania all saw a drop in overall confidence. While confidence in the Victorian farm sector has risen in the face of higher costs due to high meat and dairy prices, a dry start to the cropping season in South Australia has had minimal influence. According to the report, half of the 1000 Australian farmers polled believe the current Ukraine crisis will have a detrimental impact on their operations, citing increasing input costs as their top concern. It would have a good influence on the market, according to a quarter of respondents, because less supply would keep commodities prices high. This viewpoint was most prevalent in the grain industry.

Farm revenue forecasts for the next 12 months are unchanged, although the number of farmers planning to boost investment has decreased somewhat this quarter. According to the study, 28 percent of Australian farmers expect business circumstances to improve in the next year, down three percent from the previous quarter, while 16 percent expect things to worsen, up from 14 percent. More over half of respondents believe that business conditions will remain stable in the coming year. This is the third quarter in a row that nett rural confidence has fallen, bringing farmer sentiment back to levels last seen in June 2020, following the first pandemic lockdown.

Cotton and grain producers have the most confidence, while dairy producers have the strongest, thanks to high pricing and favourable seasonal conditions in all three industries. Confidence in the livestock sector has fallen, but robust commodities prices are helping to stabilise morale. Sheep farmers’ confidence has decreased slightly from the previous quarter, as have investment intentions and farm income predictions. In the sugar industry, sentiment was divided, with growers predicting that conditions will improve, stay the same, or worsen. Many farmers had experienced strong agricultural commodity prices and favourable seasonal circumstances for more than two years, according to Peter Knoblanche, chief executive of Rabobank Australia, but growing input costs had constrained earnings.

Many have invested in new technology, machinery, and equipment, according to him. “The benefits of those investments are undoubtedly helping farmers develop some efficiency,” he said. “However, the cost pressure is not going away, and producers will need those higher commodity prices to cover rising input costs.” The hope that commodity prices will continue to climb was identified to be the main driver of confidence among farmers with a favourable view in the latest survey.