Farmer confidence mixed: Rabobank

Farmer confidence has eased for the second consecutive quarter on the back of mixed seasonal conditions, although bright spots exist across the country, the latest Rabobank Rural Confidence Survey has found.

Victorian dairy farmers were the most upbeat, buoyed by record farmgate prices, while farmers in the major grain-growing states were also positive, with WA and South Australia binning a bumper crop and an above-average harvest also recorded in Victoria and parts of southern NSW.

In contrast, farmers in Queensland and northern New South Wales had continued to tackle prolonged drought conditions, with cattle producers doing it particularly tough.

The survey - completed earlier this month - found net overall rural confidence eased to near neutral levels this quarter with close to one third of farmers (29 per cent) reporting optimism about the state of the rural economy and close to one third reporting pessimism (27 per cent). A total of 39 per cent of farmers expect similar conditions to last year.

Rabobank group executive for Country Banking Australia Peter Knoblanche said, as in the previous quarter, rural confidence continued to be largely dictated by seasonal conditions, with the dry having intensified across large parts of Queensland and northern New South Wales in the first months of the year.

"In contrast, timely rains had seen Western Australia and South Australia harvest one of their best crops on record, while strong domestic demand and a weaker Australian dollar underpinned robust grain prices," he said.

The impact of seasonal conditions on farmer sentiment was more pronounced this quarter with 64 per cent of those expecting conditions to worsen citing the season as cause of their pessimism (up from 40 per cent with that concern previously). Input costs were also raised as a concern by 29 per cent of farmers (from 23 per cent previously), while a quarter of farmers attributed their negative view to the commodity price outlook (down from 33 per cent).

Farmers confident about the year ahead noted seasonal conditions (43 per cent) and commodity prices (34 per cent) as the primary reasons for their optimism - mainly driven by dairy and grain producers. The state of overseas markets was also nominated as a positive factor (by 23 per cent).

While their outlook for the overall rural economy had eased, Australian farmers were generally more bullish about the expectations of their own farm businesses. More than one-third (34 per cent) still held positive views on the performance of their business over the next 12 months, while 18 per cent expected a deterioration in business performance (up from 14 per cent previously).

Farmers reported robust income expectations with 73 per cent of farmers expecting the same or better incomes compared to last year. On the back of record dairy prices recently, dairy farmers held the strongest income outlook with 70 per cent anticipating their incomes to be higher than in 2013.

Australian farmers' investment intentions remained strong with 80 per cent expecting to maintain or increase their level of investment in their farm business over the next 12 months (down marginally from 85 per cent in the previous quarter). States

The survey saw mixed results across the states this quarter with some improvement in net sentiment recorded among farmers in South Australia and New South Wales compared to the previous quarter.

Confidence in South Australia was underpinned by strong sentiment among grain growers, who recorded a record harvest as well as sheep producers, who reported improved market dynamics.

"Farmers in South Australia couldn't have asked for a better season last year with 85 per cent of the state's farmers expecting this year to be as good if not better," Mr Knoblanche said. "NSW farmer confidence meanwhile is mixed on the back of recent rains alleviating the dry conditions across much of southern and central NSW, but with little reprieve for farmers in the northern parts of the state during the survey period.

For the sixth consecutive survey, farmers in Victoria remained the most optimistic in the country. This was largely underpinned by the positive fundamentals for dairy - particularly over the past 12 months.

Meanwhile, confidence eased among farmers in Western Australia and Tasmania with both states coming off previous highs. WA rural confidence however remains at healthy levels.

Queensland reported the weakest overall rural sentiment with the state's prolonged drought weighing heavily on many of the state's farmers.

Sectors Confidence among the nation's dairy farmers remained higher than those in other sectors with 54 per cent expecting conditions to improve in 2014 on the back of stronger prices.

Confidence also picked up in the grains industry with many of the nation's farmers harvesting an above-average crop.

Sheep producers retained a fairly stable outlook on the year ahead with graziers relying on autumn rains to hold on to stock over winter.

Little upside was seen from the nation's beef farmers with oversupply and drought forcing the hand of many farmers.

Confidence eased this quarter among Queensland sugar producers as price worries weighed on sentiment.

Questioning respondents for the first time on human resources, the survey found 56 per cent of Australian farmers reported it difficult or very difficult to attract and retain farm employees. Cane farmers reported the most challenges with farm labour with 71 per cent finding it difficult or very difficult to retain and attract farm employees, while cotton farmers had the least problems in this regard (only 13 per cent reporting difficulties).

Mr Knoblanche noted availability of farm labour and farm succession were among the issues being canvassed in the Federal Government's White Paper on Agricultural Competitiveness.