Australian farmer confidence has improved marginally thanks to easing concerns about commodity prices and input costs. However, it remains in negative territory overall.
While around half of the farmers expected no change to how the Australian agricultural economy would perform in the next 12 months, about 13 percent expected conditions to improve (up from 11 percent in the previous survey) and slightly less expected conditions to worsen (35 percent, down from 36 percent previously).
Fewer farmers who thought conditions would worsen are now worried about falling commodity prices (56 percent, compared with 68 percent in the previous quarter) or rising input costs (down to 29 percent from 35 percent last quarter).
Positive About Rising Commodity PricesFarmers with a positive outlook were buoyed by improved markets, and 65 percent nominated rising commodity prices as a driver for their confidence, up from 55 percent in the first quarter of 2023.
Tasmania and Western Australia were the only states to return a drop in confidence.
Rabobank group executive for Country Banking Australia, Marcel van Doremaele, said farmers with a positive outlook were reflecting the hope that the sector had weathered the worst of price cycles and was now coming out the other side.
“It has certainly been a period of adjustment for our agricultural sector, as we come off historically high commodity prices, especially for the cattle and lamb sectors,” he said.
Cotton Bucks Trend of Confidence DeclineWhile confidence had declined across almost all commodities in the latest quarter, cotton had bucked the trend with increasing optimism found among growers, with net confidence bouncing from -20 percent to five percent this quarter.
“Although there has once again been a mixed bag of seasonal conditions for cotton producers, the cotton industry–contrary to the majority of agricultural commodities–has welcomed price improvements in markets in recent months which has buoyed confidence,” Mr. van Doremaele said.
Chinese customs data shows that 43,364 metric tons of Australian cotton entered bonded warehouses in China from January to July of 2023, more than double the number throughout 2022, and another 1,148 metric tons have cleared customs.
“A few people are taking a punt and sending a little bit but they’re big companies who can divert it elsewhere if needed,” said Adam Kay, head of industry group Cotton Australia.
Chinese mills were forbidden to buy Australian cotton since October 2020, among other restrictions on exports like barley, coal, and wine, which were imposed by the CCP after former Prime Minister Scott Morrison called for an independent inquiry into the origins of COVID-19.
Diplomatic ties have thawed after the Labor government of Prime Minister Anthony Albanese was elected in May 2022.
Farm Performance and InvestmentsIn line with concerns about commodity prices and the seasonal outlook, over half of Australian farmers surveyed expect their gross farm income to decrease in the year ahead (54 percent) and only 14 percent anticipated incomes to increase.
The survey found more producers are looking to rein in their investment plans for the coming year, with net investment intentions declining to the fourth lowest level in the survey’s history.
Only 15 percent of Australian farmers expect to increase investment in their farm business in the coming year (back from 21 percent last quarter) while 22 percent plan on reducing investment (up from 13 percent). However, 62 percent still intend to maintain investment at existing levels.
“Farmers are becoming increasingly cautious as reservations about declining seasonal conditions dovetail into general apprehension about markets. As budgets tighten, appetite for spending is naturally curtailed,” Mr van Doremaele said.
“That’s not to say there isn’t still interest in strategic investment such as land expansion. However, farmers are factoring in interest rates, softer commodity prices and the seasonal outlook before committing to investment projects.”