Western Australian agricultural producers are the most optimistic about the prospects of the March quarter, according to the Westpac and Charles Sturt University Agribusiness Index.
Western Australian agricultural producers are the most optimistic about the prospects of the March quarter, according to the Westpac and Charles Sturt University Agribusiness Index.
The text of an edited announcement is pasted below
Seventy-three per cent of Western Australia's agricultural producers are looking to 2007 with confidence, even after confirmation of the expected weak December 2006 quarter, according to the inaugural Westpac & Charles Sturt University (CSU) Agribusiness Index.
The Westpac & CSU Agribusiness Index, a new quarterly survey, provides a detailed national and state-based overview of business performance by primary producers as well as upstream and downstream suppliers in the agribusiness sector, based on the average of results collected.
Buoyed by above average performances from upstream and downstream producers, Western Australian farmers expect the greatest improvements in performance amongst the states in the March 2007 quarter, with business performance predicted to rise from -0.24 to 0.04. While 56 per cent of farmers surveyed felt that the current dry conditions were the same or worse than the drought of 2002, they are optimistic that production levels will increase once expected Autumn rains arrive.
Westpac general manager of regional and agribusiness banking Graham Jennings says the December 2006 quarter Index highlights reasons for the agribusiness sector to be optimistic that when weather conditions improve the industry is poised to regain momentum.
"The Index shows a comprehensive overview of the state of play in Australian agribusiness and the regional breakdowns allow us to really understand how the drought has impacted upon rural communities.
"Crucially it also shows how weather conditions are the most negative influence on business performance and that farmers should feel relief across operating costs, capital expenditure and profit margins should the rains return," Mr Jennings said.
In a one-off question the December 2006 quarter Index also examined farm financing which showed that 35 per cent of farmers sought finance in the last 12 months, with only 17 per cent of those who sought financing having difficulty obtaining credit. In addition 16 per cent of producers had farm management deposits with 39 per cent of those producers drawing down their deposits during the drought period.
According to Westpac senior agribusiness economist Justin Smirk, the low number of farmers seeking additional financing suggests that agribusiness owners are looking long-term when forming drought survival strategies.
"Of those farmers who did seek finance, some will be looking to invest in business improvements as well as seeking day-to-day capital to manage their seasonal cash flow. The majority of producers are being conservative and cutting costs during the drought period, so we would expect to see production and investment lift in the next quarter," Mr Smirk said.
"The results on farm management deposits give us a good idea of producers' sentiments on farm liquidity and how they are using cash reserves. Producers are still tapping into their deposits yet being cautious about managing this. I anticipate that we will see a bigger drawdown as we head towards the cropping season when producers will tap into their liquid assets rather than borrow to better offset risk and capitalise on any potential returns."