March 31, 2009

The current market environment has boosted the confidence of Australian grain farmers in prospects for the next 12 months, but the very opposite is also true for the beef and dairy sectors.

About 43 percent of grain farmers expected their farms to improve performance in the next 12 months, helped by better rainfall, lower input costs, a weaker Australian dollar and reduced interest rates, according to a quarterly rural confidence survey released by Rabobank.

This is up from 34 percent in a December survey.

Although wheat prices had eased in US dollar terms since December, Australian prices were supported by a weaker Australian dollar, said Peter Knoblanche, Rabobank general manager rural Australia.

Knoblanche said farmers in some parts of Australia such as northern New South Wales and Queensland were likely to plant large crops after good summer rains boosted soil moisture. However, he noted that southern parts of New South Wales and Victoria have had a terrible summer.

Knoblanche said the grain farmers are currently set up for another good year of production, provided there is rain.

But for the beef, wool and dairy sectors, 48 percent of the farmers expected overall conditions to worsen in the coming year, compared with 39 percent in the previous quarter. About 31 percent of the farmers expected their farms to deteriorate.

This was the fourth successive quarterly decline, with only 16 percent of the 1,200 farmers surveyed across sectors expecting overall conditions to improve, down from 23 percent in the December survey.

The main driver behind the fall in confidence appears to be concerns of the potential impact of the global financial crisis over the next 12 months, Knoblanche said.