September 6, 2011

Australia's farm confidence decreases amid economic turmoil

Farm confidence in Australia dropped to the lowest level in more than two years amid global economic turmoil, according to a Bloomberg report.

A survey completed about a month ago found the number of farmers expecting conditions to worsen in the coming year increased to 35% from 12% in the previous quarter, Rabobank's Australian unit said. It also showed that 18% of farmers expected conditions to improve in the coming year, down from 42% last quarter.

"While the Australian economy and agricultural fundamentals remained strong, it appeared some of the global turmoil, which was occurring at the time of the survey, had rubbed off on farmer sentiment," Rabobank General Manager Rural Australia Peter Knoblanche said. The survey also highlighted concerns about the suspension of live cattle exports to Indonesia, the proposed carbon tax and the impact of coal-seam gas exploration and mining on agriculture, he said.

A US credit-rating downgrade, concerns about a global recession and continued European sovereign-debt woes wiped out more than US$4 trillion in stock market value in August, according to data compiled by Bloomberg. Australia on June 8 banned livestock exports to Indonesia, its biggest market, after television footage showed animals being tortured in slaughterhouses. Sales were allowed to resume in July.

Cattle farmers reported the lowest confidence, with only 8% expecting conditions to improve in the next year. A higher Australian dollar was also affecting returns for producers, Knoblanche said.

All states recorded weaker sentiment compared to the previous quarter, according to Rabobank. Queensland state recorded the lowest confidence levels in the survey.

Still, seasonal conditions across much of Australia are good or average, Knoblanche said. "There has been enough rain to maintain the prospects for winter crops and for pasture growth for graziers," he said.