News

Farmers braced for tough winter

By Dairy News

THE NATION’S farmers are bracing for a tough winter, after autumn rains eluded much of the country, hindering crop planting and pressuring livestock producers moving into the colder months, the latest Rabobank Rural Confidence Survey has found.

However recent widespread rainfall across Western Australia and parts of South Australia and the eastern states has offered hope of some reprieve for agricultural producers for the year ahead.

While the latest quarterly survey of 1000 Australian farmers, released in June, found an uptick in overall rural confidence in the nation, sentiment remained at low levels — with the rural confidence index edging up to a net reading of -1 per cent, from -11 per cent last survey.

Rabobank Australia chief executive Peter Knoblanche said while some areas of Australia had welcomed good rains in early May, many key agricultural regions had struggled through a severely dry autumn, waiting for the seasonal break to replenish well below-average soil-moisture levels and depleted water catchments, after such a prolonged period of dry weather.

“This will have been weighing heavily on farmers as the winter cropping season began and as livestock producers moved into winter with poor pasture growth and low dam levels,” he said.

Mr Knoblanche said there was now some potential for an average crop for some parts of the WA wheat belt.

Meanwhile Victoria, Queensland and NSW all reported an upswing in sentiment — albeit from a low base — and sentiment remained subdued in Queensland and, to a lesser extent, NSW.

In Victoria, Mr Knoblanche said, confidence had climbed to its highest level since late-2017, as widespread rains in early May had enabled growers to get their crop in, with follow-up rains received since.

Mr Knoblanche said it was the dairy sector which saw the biggest lift in confidence, albeit from low levels, signalling early signs of a recovery in dairy farmer sentiment.

“Processors have come into the market with strong milk price signals for the 2019–20 season, and while this has started to drive that lift in farmer sentiment, it has been somewhat muted by the elevated input cost environment for feed and water,” Mr Knoblanche said.

Farm business performance and investment

While farmer confidence posted some improvement this quarter, investment appetite among farmers was little changed.

A total of 19 per cent of survey respondents indicated they were looking to increase investment in their farm businesses over the next 12 months, while a further 64 per cent intend to maintain investment at current levels.

Rain events

Rabobank regional manager for southern Victoria and Tasmania Hamish McAlpin said there was a lot of anxiousness leading up to what was a late autumn break, but widespread falls in early May had started to turn the season around, with follow-up received since. That said, it remains very dry in east Gippsland, although rain was received in the far-east of the region, with farmers battling drought conditions for the past two years.

Mr McAlpin said despite the good start for many across the state, spring rainfall would be critical, with soil moisture levels remaining low at depth following “the extended dry” in many parts of the state.

The heaviest of the falls, he said, were north of the divide, particularly in the upper north-east regions around Corryong and the Kiewa Valley.

“This has seen the catchments for the Murray and Goulburn systems start to wet up and has alleviated the need for temporary water — which spiked around $640 a megalitre a few weeks ago and is now trading around $550 a megalitre — but many rain events will be needed to fill the catchments,” Mr McAlpin said.

Confidence boost

By region, the biggest lift in confidence (although from a low base) was reported in the Goulburn Murray region, with 58 per cent of surveyed farmers there expecting conditions to improve (up from 28 per cent in the March quarter).

Mr McAlpin said this improvement in sentiment had also been driven by the region’s dairy producers, with “competition for milk intensifying as processors try and cover supply shortages out of an already depleted milk pool”.

“And it is this competition, together with stronger global fundamentals, that has driven expectations for full-year prices in the 2019–20 season to close at record high levels, with some dairy producers locking in multi-year contracts at elevated prices,” he said.

Mr McAlpin said while there was good evidence of a stronger milk price next season, headwinds remained in the form of high feed and water costs. And this was reflected in the survey, he said, with 36 per cent of dairy respondents expecting their prospects to improve (up from 18 per cent), but 33 per cent expecting a similar outcome to last year, and 30 per cent believing conditions could worsen.