Rural Outlook Looking Up

Rural Outlook Looking Up

For the first time this year there has been a positive swing in the key drivers of farmer confidence. Fewer farmers are negative about the prospects of the rural sector in the coming twelve months and more plan to maintain or increase current levels of investment in stock, plant and land. And while farm input costs are expected to rise, there has been a decrease in the number of farmers expecting interest rates to rise.

These are the key results of the latest AC Nielsen/Rabobank Rural Confidence Survey taken in August/September, says Rabobank Managing Director, Bryan Inch. While the number of farmers expecting the rural economy to improve is still low, there has been a noticeable increase in the number of farmers expecting conditions to remain at current levels, Mr Inch says.

“After what was a couple of exceptional years, we have seen expectations level out” says Mr Inch. “This isn’t surprising as returns at current levels are still above long-term averages, and the underlying strength of the farming industry is sound”.

“What we are seeing, especially at farmer level, is the benefit of prudent management over the past two seasons. We have seen significant expansion of farm businesses and reinvestment back into properties, by way of fertiliser and repairs and maintenance. Farmers are seeing increased productivity from this investment” says Mr Inch.

Another aspect helping this swing is the interest rate outlook. Forty-two per cent of all farmers now expect interest rates to decrease or stay the same, which is up from 17 per cent in the August survey and 9 per cent in June.

Mr Inch says, “There has been a forty per cent increase in rural debt over the past three years. With debt servicing being a major cost on many farms, any positive move in borrowing rates will have an impact on most farm businesses.”

But the real indicator of farmer confidence in their industry is their level of investment back into their business. Nearly eighty per cent of farmers expect to increase or maintain investment at current levels in the next year.

“This is a real positive to take out of the survey, and indicates that at current prices and productivity levels farmers are receiving a satisfactory return on their investment,” says Mr Inch.

Next results of the survey will be released in December 2002.

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