Farmers worried about agricultural outlook but plan to invest anyway

Farmers are pessimistic about the future, but according to Colliers, the agricultural property market has turned the corner.

The real estate group’s latest National Rural & Agribusiness Research Report says the agricultural property sector has turned positive for the first time in 18 months.

The release of the Colliers report comes at the same time as survey of 1,200 farmers by Rabobank finds that overall farmer confidence has plummeted due to global and policy concerns,  though “inside the gate” expectations of a strong production season remain high.

According to Rabobank, more than a third of farmers (35%) expect conditions to worsen in the coming year, a significant increase from the 12% who held that view in the previous quarter. Only 18% of farmers expect the agricultural economy to improve (down from 42%), while 42% expect conditions to stay the same.

The Colliers report acknowledges that challenges lie ahead, but says property values are holding firm and there has been a “clear improvement in overall sentiment, underpinned by rising food and commodity prices during the last 12 months.

“The shift has been significant, but it has finally rolled over to the rural sector, providing a much needed boost to confidence levels and extending the tenure for some property owners.”

According to Colliers, the sectors to watch include pastoral, livestock and grazing with “an abundance of opportunity on offer here at the moment and interest in the sector is high”.

“Concerns regarding live cattle exporting will have an impact and will most likely to slow down any decision making over the short term. Overall though, demand is there and strong enquiry will continue to come through from offshore investors looking for expansion opportunities in Australia,” the report says.

The Rabobank survey did not question farmers on their intentions regarding the sale of land, but did question them on their investment intentions.

While this has declined since the last quarter, investment intentions remain robust, with 87% of farmers intending to maintain or increase the level of investment in their businesses.

“This does not suggesting a trend of an increase in farm sales.  The overall fundamentals of the agricultural sector – seasonal conditions and commodity prices – are also very favourable,” a Rabobank spokesperson told Property Observer.

Rabobank general manager Rural Australia Peter Knoblanche says the fall in farmer confidence appears to have been influenced more heavily by factors “outside, rather than inside, the farm gate”.

“Inside the farm-gate, from a production point of view, things are shaping up for an overall good season,” he says.

While the decline in confidence was reflected across all sectors, cattle farmers reporting the lowest confidence, with only 8% expecting conditions to improve in the next 12 months.

Dairy producers are most confident with 39% expecting conditions to improve.

According to Knoblanche, an expectation of favourable commodity prices and seasonal conditions had kept dairy producers positive.

“Good seasonal conditions continue to assist a strong finish to the milk production year. Most processors have announced opening milk prices for southern producers with prices slightly above where they were at last year,” he says.