In the wake of a record national grain harvest, farmers are banking unusually large sums and the 2022 swing will be another bumper year for commodity prices and agriculture sector confidence.
Agribusiness bankers say the mood and cash returns in agriculture and ranching circles are still near or above historic highs.
Despite concerns over soaring fuel, chemical and fertilizer prices and freight network bottlenecks, primary producers continue to build strong capital spending plans, anticipating a third consecutive year of high fuel prices. raw materials and generally positive seasonal conditions.
Just over half of Australian farmers expect last year’s strong trading conditions to continue, according to Rabobank’s latest quarterly sentiment monitor.
Another 31% expect things to be even better in 2022.
Australia’s largest agribusiness lender, National Australia Bank, has announced that cash inflows from its grain customers in Victoria, NSW, South Australia and Western Australia have reached their highest level since it started compile its monthly economic data in 2015.
At the same time, corporate cash income from beef cattle customers remained strong in all states on the back of rising demand for red meat, good pasture conditions and herd rebuilding after the drought, keeping the Eastern young cattle indicator at near record highs above 1100 cents per kilogram.
Interestingly, Tasman farmers are far less optimistic as local and global economic pressures bite them.
In fact, they are rather unhappy.
Soaring farm input prices, labor shortages and costs, plus New Zealand government regulations on emissions, water and compliance costs have cut kiwifruit confidence to an all-time low level in 13 years, according to the latest bi-annual survey from NZ Federated Farmers.
Despite the current increase in meat and dairy revenues, nearly two-thirds of producers (64 percent) believed that general economic conditions would deteriorate this year.
New Zealand agricultural investment sentiment was also declining, but in Australia, Rabobank said 40% of farmers planned to increase their business investment in 2022.
Rabo’s survey of around 1,000 growers found that agricultural infrastructure topped the list of capital expenditures, followed by new machinery and equipment and a growing commitment to new technology.
Western Australian farmers were the most eager to buy more land.
Julie Rynski, NAB’s regional and agribusiness manager, said grain-growing customers in WA were reaping the benefits of that state’s record winter harvest of 23.1 million tonnes.
“WA’s January revenue was approximately 25% higher than the same period in 2019, when growers experienced a strong season combined with drought-induced strong demand from eastern states,” a- she declared.
Western Australia’s winter crop receipts for 2021-22 were now estimated up 37.3% from the previous season.
Nationally, crop cash inflow trends reflected high commodity prices and a bumper winter harvest, now estimated at 61.9 million tonnes, up 10.8% for 2021-22.
Elsewhere in the agricultural sector, cash inflows from cotton-related businesses remained strong thanks to excellent seasonal conditions, which were supported by the replenishment of irrigation stocks and the promise of good performance of dryland crops this year.
Rabobank noted that sugar cane growers had also been particularly optimistic before the recent flood disaster in southern Queensland and the NSW north coast, where farms and processing plants were inundated.
In fact, Rabobank found that sugarcane was the most bullish of any commodity category in February, largely due to positive global price trends, helping Queensland post the highest rural confidence levels. in the last quarter, alongside Tasmania.
Optimism in the livestock sector was also remarkable.
Low interest rates and continued strength in our markets are helping farmers create opportunities for growth and expansion
Rabobank Australia chief executive Peter Knoblanche said that even in the face of extremely harsh seasonal conditions and natural disasters in some areas, persistently high commodity prices over the past three years had placed the country’s farmers in a “very strong position”. .
“Low interest rates and the continued strength of our markets are helping farmers create opportunities for growth and expansion that lead to greater productivity across the sector,” he said.
For the country more broadly, the latest survey found that “commodity prices are king”, with 83% of those expecting an improved outlook this year citing prices as the driving factor.
Seasonal conditions also fueled positive sentiment.
Beware of additional costs
However, farmers are also wary of rising input costs eating away at their promising yields, with almost two-thirds of the 17% of farmers who expected a deterioration in business prospects attributing their concern to rising production costs.
Mr Knoblanche said the bank was closely monitoring the impact of the Russian-Ukrainian war on the markets and supply of key agricultural inputs – particularly urea and, to a lesser extent, potash.
He agreed that any rise in input prices was likely to further weigh on farmers’ morale.
In New Zealand, Federated Farmers chairman Andrew Hoggard said 61% of kiwifruit growers said they had made a profit – up 5.5 percentage points in six months – 11% expected a decline in profitability, largely due to an explosion in production costs.
“We are currently seeing strong returns on meat and dairy thanks to strong global and food security concerns, but it is clear that farmers are seeing much of this income going away with rising fuel and fertilizer prices, rising labor costs and heat inflation affecting all other New Zealanders.”
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The story Farmers make money as big harvests and commodity prices pay off first appeared on Farm Online.