Agribusiness & Food

Rural confidence slammed by dairy sector, dry start

Australian farmer confidence has taken a step back from the highs reported earlier this year, as a dry autumn start and challenges in the dairy sector weigh on rural sentiments.

A survey completed in May by agribusiness analyst Rabobank showed after starting 2016 on a strong note, rural confidence has now declined.

Rabobank’s survey found just 28% of farmers were optimistic about the agricultural economy would improve, down from 34% in the previous survey.

The proportion of farmers expecting worse conditions was 19%, up from 11%.

Rabobank’s national manager for country banking Todd Charteris said the dry and unseasonably warm conditions throughout much of summer and autumn were a key cause for the more subdued outlook.

“After very little rain to speak of since January, farmers were grappling with dry conditions until the rains fell in early May,” he said.

“While the south-east of the country has received the much-needed break in the season, some parts of South Australia have still been awaiting rains to get their crops in.

“And rainfall has been very patchy in Queensland – although there have been some good falls in the north-west, the Maranoa (or Western Downs) and parts of Central Queensland,” he added.

59% of farmers think weather conditions will worsen, up from just 35% who thought so in the prior survey.

On the dairy front, Charteris said pressures from the global market downturn and dry conditions in many dairy regions had been worsened by the recent cut in milk prices.

“The retrospective pay cut, announced by two of the major dairy processors, had export-oriented producers reeling from the news, as it creates significant cash flow issues in the short-term,” he explained.

“While the medium-term forecast for the sector remains more positive with global prices expected to improve, it will take a while to flow back to farmgate, with producers bracing for low milk prices next season.”

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