June 17, 2022
Australian wheat farmers' confidence decline due to rising costs
A Rabobank survey found that Australian farmers' confidence dropped in the latest quarter of the year due to rising production costs, even though commodity prices are at an all-time high and the country is expecting a bumper harvest, Reuters reported.
According to Rabobank, while the war in Ukraine is driving up farm selling prices, especially for grains, those increases are necessary to offset higher input costs.
The study found that about half of Australian farmers believe the Ukraine conflict has affected their businesses. Only 28% of respondents expected business conditions to improve in the next year, down from 31% the previous quarter.
Farmers said their revenues are likely to remain constant over the next 12 months.
The survey cited rising fertiliser, fuel, freight, and machinery prices, some of which were influenced by the war, as well as broader inflationary pressures in the Australian economy. All of this was weighing heavily on the minds of farmers.
Peter Knoblanche, CEO of Rabobank Australia, said farmers have enjoyed strong agricultural commodity prices for more than two years, but many were now facing margin pressure.
He said cost pressures aren't going away, and manufacturers will need higher commodity prices to keep up with increased input costs.
Rabobank is a major agricultural lender in Australia.
The UN's Food and Agriculture Organization's food price index, which tracks the most widely traded food commodities, averaged 157.4 points in May, up 22.8% compared to a year ago.
Knoblanche said there is a lot of trepidation among farmers about what this will mean in the long run, which is translating into lower levels of optimism as the next round of (Russian sanctions) takes effect.
Higher input costs have reduced margins, but the survey found that farm investment will remain largely unchanged.
Australia, one of the world's top grain exporters, is on track for a third year of near-record wheat production in 2022, thanks to favourable weather conditions across the country's grain belt.
According to estimates from brokerage IKON Commodities, Australian farmers have nearly finished sowing wheat on about 14.45 million hectares (35.7 million acres), an all-time high, ahead of the southern hemisphere winter.