24 Mar 2015

Rebound in confidence in post-farmgate sector

Improved seasonal conditions and the falling Australian dollar have driven a rebound in confidence, and expected conditions for the coming 12 months, for the post-farmgate agribusiness sector.

The latest quarterly National Australia Bank (NAB) post-farmgate agribusiness survey shows that the index for business conditions rebounded in the December 2014 quarter to +1, up from -6 in the previous survey.

Khan Horne, General Manager of NAB Agribusiness said that confidence in the sector had been boosted by a number of factors.

“We expect the AUD to continue to fall and, combined with a stabilisation in international dairy prices and continued demand for Australian beef, this may lead to further improvement in conditions,” Mr Horne said.

“The outlook for conditions over the next three months improved significantly, with the index rising to +6 from the previous measure of -1.

“Expectations are even higher for the next 12 months, with the index up from +5 to +12. This wasn’t mirrored in overall business expectations and shows that agribusiness is more optimistic than the broader Australian economy,” he said.

Confidence across individual commodities in the December quarter was mixed.

“The index showing the level of confidence in protein was a standout in the survey. Beef was up considerably to +33 with the beginning of encouraging rains in Queensland, while confidence in sheep meat was down slightly to a still very optimistic +31,” Mr Horne said.

“Similarly, confidence in dairy jumped from +23 to +32. This may reflect the first signs of an increase in international dairy prices, but more likely reflects stronger seasonal conditions.

“Confidence in fibres was mixed. Cotton was up sharply to +5 from -22, despite lower domestic planting on account of lower irrigation water availability. Confidence in wool fell to -7 despite prices remaining relatively stable,” he said.

Agribusiness capital expenditure expectations for the coming year also increased from +21 to +28, more confident than overall business expectations of +21 across other sectors.

View the December 2014 Post-farmgate Agribusiness Survey here

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