SEASONAL OUTLOOKS BOOST FARMER INVESTMENT INTENTIONS FOR COMING YEAR

• Commonwealth Bank Agri Insights Index rises 1.5 points in six months.
• Farmer intentions signal growth across most elements of farm business, with innovation and technology remaining key areas for investment focus.
• Dairy, summer grain and prime lamb enterprises most likely to expand
  in the coming year.
• Australian farmers see market access and transport infrastructure as the most important challenges to opportunity in Asia.

The Commonwealth Bank Agri Insights Index, which measures farmer intentions for the coming year, has grown 1.5 points to 8.5, on the back of solid seasonal results and promising outlooks for many commodity sectors.

Agri Insights surveys 1,500 farmers about 14 areas of farm operation, covering physical aspects (including production scale and land size), financial investment intentions and people aspects (regarding people working in and for the farm business).

The latest survey found that farmers are continuing to invest within their own businesses, with 20 per cent saying they will increase their investment in farm technology and innovation, up from 14 per cent in May, as well as 33 per cent planning to increase their fixed infrastructure and 18 per cent intending to expand their education and training.

Commonwealth Bank Executive General Manager Regional and Agribusiness Banking, Geoff Wearne, says the strong results indicate continuing optimism in the sector.

“The survey results reflect what my team is seeing in the field, which is that strong prices and good weather are promoting a buoyant mood in many sectors. That is translating nationally into positive investment intentions for the coming year,” he says.

“With a few good seasons behind them, many farmers are in a position where they’re able to update their on-farm infrastructure and invest in new technology. Appropriately structured finance has a crucial role to play in supporting farmers to take up the latest innovations and use new technology to maintain a competitive edge.”

The research also showed continuing growth in the financial elements of the Agri Insights Index, driven in part by intentions to increase off-farm investment.

“Off- farm investments provide additional income streams that offer security and help even out the bumps that inevitably come with seasonal businesses,” Mr Wearne says.  “These strategies are especially critical in areas where farm sizes are growing, as farmers in these regions aren’t necessarily diversifying within their core business. Many of these farmers have found through experience that investing outside the farm is a good risk management approach.”

According to the latest survey, many farmers plan to increase their scale of operation in the next 12 months. This is particularly true for farmers producing summer grain (25 per cent planning to increase), dairy (18 per cent planning to increase) and prime lamb (14 per cent planning to increase).

“Positive intentions for summer grain have been driven by fairly good rainfall in the major summer cropping regions, while global demand and expected tighter supply have shaped positive intentions among prime lamb producers,” Mr Wearne says.

“We’re also seeing continued growth in dairy and the outlook for the sector remains very robust.”

Although most commodity sectors look positive, Mr Wearne acknowledged that the cotton sector is still feeling the effects of oversupply and limited water.

“Some cotton growers have had a tough season but it’s important to note that the results only reflect immediate intentions, and we believe the long term outlook for cotton is positive,” he says.

While farmers are focusing their investments close to home, Agri Insights found they continue to look to Asia for opportunity, with 49 per cent of those surveyed saying they already sell to Asian markets.

“The scale of growth in Asia continues and Australia’s reputation for clean, green, safe products is driving a lot of demand,” Mr Wearne says.

“But farmers know that Asian demand alone will not guarantee Australian success in the region. We must identify and act on challenges to market access, and recognise that we’re competing with the rest of the world for Asia’s business.”

Surveyed farmers said barriers to competitiveness, like tariffs and labour costs, were the most important factors that need addressing. The survey also found that improving the infrastructure that allows farmers to get their product from farm to market was very important.

“Australian agribusiness is moving to a new phase in its relationship with Asia, with lots of new export avenues opening up,” Mr Wearne says. “From cattle genetics to boxed beef and now even fresh milk, Australian products are highly sought after. The industry needs the right infrastructure, finance and connections to be able to identify and develop opportunities in the region.”

Regional Agri Insights highlights

• Optimism continues to return to Queensland, which saw the strongest growth of all states in the Agri Insights index (up 3.7 per cent to 7.0).
• New South Wales farmers are particularly focused on investment in fixed infrastructure, with 38 per cent of them saying they will invest more in this area in the coming 12 months.
• Victorian farmers are much more likely to increase investment in plant and equipment now than when they were last surveyed (19 per cent intending to increase plant and equipment compared to 11 per cent in May)
• South Australia returned very positive results, including 21 per cent of prime lamb producers intending to increase their enterprise.
• Tasmania achieved the highest overall index of all states at 13.6 points. Tasmanian farmers are by far the most likely to be planning to invest more in fixed infrastructure, with 39 per cent saying they will do so.
• Western Australian results remain positive, with 31 per cent of WA farmers intending to invest more in fixed infrastructure.

For more details about Agri Insights, see the full report.

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