30/03/2009 - 13:47

WA rural confidence highest nationally

30/03/2009 - 13:47

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Confidencce in the Western Australian rural sector has bucked the national trend and risen slightly, although levels are still well below the near record highs of last year, according to the latest Rabobank survey.

Confidencce in the Western Australian rural sector has bucked the national trend and risen slightly, although levels are still well below the near record highs of last year, according to the latest Rabobank survey.

Those with the greatest confidence were grain growers in the northern wheat belt, who achieved drought-breaking yields in February, while international markets and falling commodity prices were the biggest cause for concern across the board.

While the percentage of farmers expecting the agricultural economy to improve in the next 12 months had dropped slightly from 17 per cent to 16 per cent, the percentage expecting it to worsen had dropped significantly from 51 per cent to 45 per cent.

Farmers' incomes over the previous three months were higher than for the same period a year earlier, with 40 per cent receiving higher incomes than the previous year and only 31 per cent lower.

The survey found 27 per cent of WA producers expected their farm business performance to improve over the next 12 months, up on last quarter and significantly better than farmers perception of the overall agricultural economy, according to Rabobank Western Australia state manager Crawford Taylor.

“The variance between these two measures tends to indicate an underlying confidence, as WA farmers feel more positive about their personal situation than that of the agricultural economy as a whole,” he said.

 

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Results at a glance: WA rural confidence has improved slightly, although levels are still well below the near-record high achieved in the first half of 2008. Concerns about international markets – along with falling commodity prices – had the biggest impact on confidence levels. Sentiment remains strongest amongst the state’s grain growers and in the state’s northern wheat belt region.

After a ‘roller-coaster ride’ last year, Western Australian farmer confidence has stabilised, recording a slight improvement in the latest quarter. The Rabobank Rural Confidence Survey, released today, has found that while overall WA rural sentiment remains at a negative level, confidence varies greatly between regions, with positive sentiment recorded for grain producers in the northern agricultural areas. Southern regions, particularly the south west corner, are much less confident. The latest quarterly Rabobank Rural Confidence Survey – taken approximately one month ago – shows just 16 per cent of WA's primary producers expect the agricultural economy to improve over the next 12 months, with 45 per cent expecting conditions to worsen. While the number of farmers with an optimistic view was slightly lower than in the previous survey – when 17 per cent had reported a positive outlook – the percentage expecting conditions to worsen had significantly dropped, from 51 per cent previously. This is the second consecutive quarter where Western Australia has recorded a slight increase in rural confidence and runs against the national trend, where farmer confidence has continued to slide. After reaching near record highs in the first half of 2008, WA rural confidence had previously fallen sharply last September.

“The survey is showing a prevailing cautious attitude due to the economic challenges unfolding internationally and the impact that this could have on commodity markets,” Rabobank Western Australia state manager Crawford Taylor said.

“Certainly the effects of softening international demand are already being felt particularly by those producing commodities exposed to discretionary consumption such as wine, wool and dairy.”

Mr Taylor said the state's northern wheat belt had experienced generally favourable seasonal conditions, with good yields recorded.

“2008 was a fantastic year for producers in the northern agricultural region which fed through to positive sentiment,” he said.

“The central and eastern wheat belts were set for a good year however a dry August and a major September frost event severely impacted yields and returns. Then to make matters worse, rain in southern and south eastern areas impacted grain quality. The highs and lows were definitely experienced by producers throughout the agricultural area.”

Of those WA farmers in the survey who expected conditions to decline over the next 12 months, 55 per cent nominated overseas markets / economies as a major contributing factor, up from 17 per cent in the previous quarter. Falling commodity prices were also top of mind, cited by 37 per cent of farmers. The deceleration of the global economy has continued to impact agricultural commodity markets in recent months, with weakened end demand particularly for more discretionary agricultural products. Supply has either been buoyant or has been slow to adjust to weakened demand. This has seen downward pressure on agricultural commodity prices and enhanced market volatility. International grain, dairy and cotton prices in February fell to their lowest level in two months – some 50 to 60 per cent lower than year-earlier prices. Locally however, Australian producers have continued to experience some relief from these price falls courtesy of a weaker domestic currency. The Reserve Bank of Australia's Rural Commodity Index shows Australia's major agricultural commodity prices fell 34 per cent in February since the record highs set in March last year in US dollar terms, but just seven per cent in Australian dollar terms – still historically strong price levels. Reflecting the recent drop in fertiliser, chemical and fuel prices, just 27 per cent of WA farmers cited rising input prices as a concern, down from 82 per cent last quarter and 79 per cent the quarter prior.

The latest Rabobank survey found that overall 27 per cent of WA producers expected their farm business performance to improve over the next 12 months. This is up on last quarter and significantly better than farmers perception of the overall agricultural economy, Mr Taylor said.

“The variance between these two measures tends to indicate an underlying confidence, as WA farmers feel more positive about their personal situation than that of the agricultural economy as a whole,” he said. Farmers' incomes over the previous three months were found to be, on balance, generally higher than for the same period a year earlier, with 40 per cent receiving higher incomes than the previous year and only 31 per cent lower.

Despite falling slightly, WA farmers' investment intentions remain at a positive level. A total of 27 per cent of respondents expected to increase investment in their farm businesses in the next 12 months, while 23 per cent intended to reduce investment.

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