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AgLife| Confidence low after a dry season

A survey into Victorian farmer confidence has revealed a generally pessimistic outlook for the next 12 months, based on a dry 2018.
A final Rabobank Rural Confidence Survey for 2018 showed Victorian farmer confidence remaining subdued at near-decade lows.
It found half of the state’s farmers were pessimistic about their prospects for the year ahead, with drought the primary concern.
Despite ongoing seasonal concerns, 95 percent of surveyed farming businesses in Victoria indicated a level of preparedness for drought – with more than half stating they were more prepared now than five years ago.
The latest survey, completed in November, found rural sentiment in the state had changed little from the last quarter, with 50 percent of Victorian farmers surveyed expecting conditions in the agricultural economy to worsen in the next 12 months.
This was compared with with 51 percent in the previous survey.
Drought remained the key driver of this pessimistic sentiment, cited by 94 percent as the reason conditions were likely to deteriorate.
Farmers expecting conditions in the agricultural economy to improve stood at 18 percent, up from a previous 14 percent, while 28 percent expected similar conditions to the previous 12 months.
Rabobank regional manager for Southern Victoria and Tasmania Hamish McAlpin said confidence was relatively subdued in grain, beef and sheep – albeit tracking above last quarter’s levels. 
“The dry start to spring and a series of frost events have taken their toll on the grains crop, with quite significant frost damage reported in areas west of Ballarat and around Horsham,” he said.
“But thankfully, frost-damaged crops that have been cut for hay have still been able to realise good returns.”
Mr McAlpin said Victoria’s winter crop was expected to be down about 40 percent on last year’s strong harvest result, with the multiple frosts and dry start to spring limiting grain filling.
“Also incentivised by high fodder prices, upwards of 50 percent of planted area will not be harvested for grain in the Wimmera and Northern Central region,” he said.
“However, there will still be some good yields in areas such as Hamilton and those crops around Horsham that have not been frost affected are yielding better than expected given how dry it has been.”
With availability of grain tight, Mr McAlpin said the cost of feeding livestock was weighing on the minds of beef and sheep graziers.
“The decisions facing graziers are becoming tougher, as many have already made decisions around the sale of older or younger stock, and are now weighing up whether to sell breeding animals,” he said.
Mr McAlpin said circumstances were particularly challenging for the dairy industry, with 61 percent of surveyed dairy farmers reporting a pessimistic outlook, up from 47 percent with that view in the September quarter.
“The dry season has increased the requirement for, and the cost of, bought-in feed and water for dairy farmers, particularly in the Murray dairy region,” he said.
“These input prices are around double that of last year and there is little relief for margins foreseen in 2019.
“This could see a sizeable drop in milk production in this northern region and, if it eventuates, the national milk pool is at risk of falling to its lowest level in two decades.”
With little change in overall confidence levels, farmers’ expectations about their gross farm incomes also remained relatively in line with last quarter.
A total of 43 percent of Victorian farmers surveyed were expecting their incomes to fall in the coming year – up slightly from 38 percent in the previous survey – while 36 percent expected similar incomes to the past 12 months.
Those expecting an improved financial position stood at 22 percent, the same percentage as last quarter.
Longer-term confidence in the Victorian sector remained relatively sound, however, as reflected in farmers’ investment intentions for the coming year – with 17 percent looking to increase their investment, and the majority, 67 percent, planning to maintain current levels.
Long term
Mr McAlpine said for farmers looking to expand the rural property market remained quite active, particularly in western Victoria – which had exhibited strong land-value growth.
“In the Western District, we are continuing to see a fair bit of interest and activity in the property market, indicating the buoyant longer-term outlook for the ag sector,” he said.
The next results are scheduled for release in March, 2019.

The entire December 19, 2018 edition of The Weekly Advertiser is available online. READ IT HERE!

The entire December 19, 2018 edition of AgLife is available online. READ IT HERE!

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Posted on Dec 19 2018

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