Australian farmers have shown the first improvement in confidence levels in more than a year, according to the latest quarterly Rabobank Rural Confidence Survey.
Although still at relatively low levels, farmer sentiment has rallied, following four successive quarterly declines.
Rabobank general manager for rural Australia, Peter Knoblanche, said an overall positive start to the season, coupled with the comparatively good performance of the farm sector compared to the rest of the economy, was giving farmers a relatively brighter outlook.
"The best way to describe the mood of many of the nation's farmers at the moment is one of cautious optimism," he said.
The rally in confidence had occurred despite concerns voiced by many farmers regarding global market conditions, softening commodity prices and ongoing dry conditions in some parts of the country.
The survey – undertaken a month ago – questions approximately 1200 farmers across a wide range of commodities and geographical areas throughout Australia on a quarterly basis.
It found 20 per cent of farmers expect conditions to improve in the coming year, up from 16 per cent last quarter.
The number of farmers expecting conditions to worsen decreased to 37 per cent, down from 48 per cent previously.
Mr Knoblanche said the underlying supply and demand fundamentals in agriculture remained favourable.
"We have seen a softening in prices for some key commodities, including wheat, however, compared with many other industries, farming is in a relatively good position," he said.
"Some sectors though have been more affected than others, with dairy and wine in particular struggling after some big price drops as consumers in key export markets cut back their discretionary spending.
"And, in the case of dairy, supply has been slow to adjust."
Positive seasonal conditions were a major reason for increased optimism among farmers.
Of those primary producers surveyed who expected conditions to improve over the next 12 months, 44 per cent cited improved seasonal conditions as a major contributing factor.
"Seasonal conditions have, for the most part, been favourable with large areas of the eastern and southern states receiving good falls of rain over the Easter period and later around the ANZAC Day weekend and again in May," Mr Knoblanche said.
"This should result in further improvements in sentiment over the coming months, provided follow up rain is received."
Global market issues were still the main concern for those primary producers expecting conditions to worsen – 44 per cent nominating overseas markets/economies as a major reason for their declining sentiment.
However, this was down from 58 per cent with that concern in the previous quarter.
Falling commodity prices were also top of mind, cited by 35 per cent of farmers.
While many commodity prices remain well below last-year highs, grains and fibres have all edged higher in recent months (in US dollar terms), buoyed by a combination of production downgrades (Argentina), strong Chinese imports (soybeans), US planting delays (corn and spring wheat) and tight stock levels.
These increases, however, have been muted somewhat by the appreciation of the Australian dollar.
Reflecting the relatively low prevailing prices for fertiliser, chemicals and fuel, just 14 per cent of farmers in the survey cited input prices as a concern, down from 16 per cent last quarter and 41 and 73 per cent the quarters before that.
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