Input costs, rates and dry autumn erode farmer confidence

Back in March Rabobank's quarterly Rural Confidence Survey spiked following unexpectedly useful summer rain in many areas, but the farm sector mood is ending the financial year back in negative territory.

Although many drier regions scored rain after Rabobank's nationwide survey of 1000 farmers ended, only 46 per cent of respondents were expecting a stable outlook for the industry in the next 12 months.

Those tipping improved prospects shrank from 36pc to 15pc after March.

The long, dry autumn's impact was particularly evident in South Australia, Western Australia, Tasmania and Victoria, while inflationary pressures and worries about soft prices in some commodity sectors weighed on optimism nation-wide.

Restrained rural property buying plans suggested producers were paying close attention to Australia's lingering "higher for longer" interest rate trend.

The cotton sector has rebounded to be the most confident, particularly in NSW.

Optimistic expectations about stored water availability and rising prices have rallied the grower mood, although sentiment in Queensland was bruised by recent disappointing crop downgrades after significant rain at harvest.

Beef producers were still concerned about cattle market prices, while sheep sector confidence slumped with 45pc of producers expecting prospects to worsen and just 8pc foreseeing an improvement.

The looming 2028 ban on live sheep exports weighed heavily on sheep producers' minds, especially in WA where alternative markets were limited.

The survey noted a third of Australian sheep producers were concerned about overseas markets.

However, Rabobank's Australian country banking group executive, Marcel van Doremaele, said although farmer confidence was down from high levels early this year, overall conditions were generally still good.

"Rainfall in many agricultural regions has set up planting conditions for the winter cropping season, while the potential of a La Nina developing in the second half of the year is holding additional promise," he said.

"Commodity prices, while down from the very high levels seen a couple of years ago, are overall reasonable, for example in grain, dairy and cotton.

"For beef producers, there is the outlook for stronger demand from the US coming through later in the year to provide some further price support."

Farmgate milk prices would be lower in 2024-25, but the dairy sector was still looking to a profitable year ahead.

After concerns about the weather, farmers' rising input costs (35pc) and falling commodity prices (32pc) rated as their next biggest worries, while the impact of government intervention and policies also ranked as concerning (24pc).

Overseas markets and economic conditions worried 21pc of respondents.

With the easing in confidence levels, farmers reported lower income expectations.

A third anticipated an income fall in 2024-25 and those expecting better prospects fell to 21pc from 31pc in March.

Farmers' investment intentions remained stable, with those increasing their investment activities remaining at 21pc.

On-farm infrastructure such as fences, yards and silos was a key focus, with 61pc of respondents identifying this as an area for investment, followed well behind by plans to adopt new technologies and irrigation and water infrastructure spending (36pc and 24pc respectively) and new plant and machinery (22pc).

Interest in buying livestock was strongest in NSW and Queensland, reflecting more favourable seasonal conditions in these states.

Tasmanian and WA farmers had the strongest appetite for land purchases (17pc and 16pc respectively), while nationally property investment was identified as a new financial year priority by 11pc.