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Rural confidence survey finds SA farmers 'most upbeat'

29 April, 2014

A nationwide study has found South Australian farmers remain upbeat about 2014.

Optimism was found to be particularly high among the state's grain growers, who have recently bagged one of the biggest harvests on record.

Despite having a good season last year, one in five SA farmers expect an even better result for 2014, while more than half expect a year as good as the last, the latest Rabobank Rural Confidence Survey has found.

The survey – completed earlier this month – found 85 per cent of South Australian farmers were expecting the agricultural economy to improve or remain similar to last year. Of these, 22 per cent expect an improvement and 63 per cent expect conditions to remain stable, with just 10 per cent anticipating a deterioration.

A comprehensive monitor of the outlook and sentiment in Australian rural industries, the Rabobank Rural Confidence Survey questions an average of 1000 primary producers across a wide range of commodities and geographical areas throughout Australia on a quarterly basis.

Rabobank state manager for South Australia James Robinson said the state's farmers were entering 2014 in a stronger position off the back of a consistent run of good seasons.

"Last season couldn't have been better for many of the state's grain growers and it enabled graziers to replenish fodder reserves," he said.

Robinson said that while conditions remain dry in the pastoral zone – exacerbated by the hot summer – it was fairly typical for this time of year and farmers in that region were attuned to managing in such conditions.

However, for the state's beef producers, these conditions are being coupled with depressed market dynamics.

"There is the feeling that once Queensland gets a break in the season, the supply of cattle to the market will dry up and drive an upswing in prices," Robinson said.

"In contrast, prices are holding up well for sheep and lamb and the wool market is also trading at reasonable levels."

The season was the biggest driver of South Australian farmer confidence this quarter with 35 per cent of those expecting conditions in the agricultural economy to improve citing seasonal conditions as the reason for their optimism (up from 20 per cent previously).

In terms of the coming season, Robinson said the state's farmers were now at the 'cusp point' waiting for the break, which usually comes around mid-May.

"While it has been a hot and dry summer the season is by no means atypical for this time of year," he said.

"And there are some areas in the central belt that have benefited from recent rains and have good moisture in the ground."

Commodity markets also remained a dominant driver of confidence, reported as a positive variable by 32 per cent of farming businesses (down from 40 per cent) – particularly those in the sheep industry.

A total of 31 per cent of South Australian farmers with a positive outlook also noted the state of overseas markets as being a positive driver of their business confidence while 22 per cent cited the dollar.

"The recent lower dollar, together with strong domestic demand, has really helped underpin grain prices, which are trading around the $280/tonne mark for wheat," Robinson said.

Despite the positive sentiment held by the majority of the state's farmers, their outlook for their own farm business performance eased this quarter to a net reading of 14 per cent, down from 28 per cent previously. 

"While the net indicator eased this quarter, it is coming off a high base with many of the state's farmers generating positive returns last year," Robinson said.

"It's pleasing to see that more than half of SA farmers (56 per cent) are expecting a similar financial performance to last year, while a quarter are expecting their bottom line to improve further."

This has flowed into investment intentions with South Australian farmers having the strongest intentions in the country. A total of 92 per cent of farmers expect to maintain or increase their level of investment in their farm business over the next 12 months.

"Many have the resources to expand and are waiting for the right opportunities to come up," Robinson said.

"In the meantime, we are seeing strong on-farm investment as producers upgrade plant and machinery and improve their infrastructure."

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