DESPITE challenging conditions over the past 18 months Australian farmers are optimistic for the year ahead and planning new investment, according to research by the Commonwealth Bank (CBA).
• Australian farmers intend to increase investment across multiple aspects of farm business over the next 12 months
• Future growth to be fuelled by investment in fixed farm infrastructure
• Technology and education key investment priorities for Australian farmers
A survey of 1400 Australian farmers for the first CBA Agri Insights report found most intend to increase investment across their farming operations in the coming year, focusing on infrastructure, technology and education.
Agri Insights, a biannual research initiative launched today, explored multiple areas of managing an agribusiness, across the physical aspects (including production scale and land size), financial investment intentions and the people aspects (regarding people working in and for the farm business).
The research found:
31 per cent of farmers plan to increase investment in fixed infrastructure;
11pc plan to increase in plant and equipment;
41pc intend to increase investment in farm inputs;
14pc will invest more in farm technology and innovation, and
15pc will increase investment in further education and training.
Scroll down for state-by-state breakdowns
Executive general manager CBA Regional and Agribusiness Banking, Geoff Wearne, said the results indicate farmers are focused on increasing productivity and profitability through infrastructure upgrades and training.
“The overall trend indicates farmers are investing on-farm to improve sustainability and drive growth, with a lesser focus on expanding into new landholdings and off-farm investments” Mr Wearne said.
According to the research, while some farmers plan to increase the scale of production in existing operations in the next 12 months - particularly in sectors like horticulture (15pc), sugar cane (10pc), winter grains (10pc) and prime lamb (7pc) – others, such as cotton growers (23pc) and beef producers (9pc), say they will decrease production over the next year, although this is not expected to indicate a long term downturn in these sectors.
"We know that irrigation reserves are low in some areas, which will drive a short-term contraction in cotton, and seasonal conditions for beef have been very difficult. Survey responses were influenced by these recent conditions but we’re confident the long-term outlook for beef and cotton remains positive," Mr Wearne said.
The research also indicates there will be a significant increase in the level of investment in farm inputs (41pc).
Survey respondents were also asked about drought management planning. Nationally, 69pc of farmers said they were prepared for a two-year drought. Farmers across Australia were more likely to say they were prepared rather than unprepared for drought, including in NSW (68pc prepared or very prepared) and Queensland (61pc prepared or very prepared) where many farms have been operating in drought conditions for several seasons.
The research found the primary physical investment priority for Queensland farmers is fixed infrastructure like sheds, dams and fences, with 29pc of Queensland farmers intending to increase investment in this area. From a financial perspective, 40pc of farmers plan to increase expenditure on farm inputs and 14pc say they will spend more on farm technology and innovation. On the people front, 13pc intend to invest in further education and skills training.
Haseda Fazlic, general manager CBA Regional and Agribusiness Banking for Queensland, said the results show a positive outlook for Queensland farmers despite the added pressure of dry seasons or cyclone damage, and the results on education and training reflect trends across the state.
While farmers plan to invest in their operations, tough seasonal conditions have impacted on production intentions, with several sectors likely to contract in the next 12 months. In particular, 29pc of Queensland beef farmers say they intend to reduce production.
“It’s important to remember that this research looks only at the next 12 months,” Ms Fazlic said.
“Seasonal conditions have been very difficult for beef producers and that is certainly affecting short-term intentions, but the long-term outlook is strong and we remain very confident in this sector," said
On the physical front, 30pc of NSW farmers plan to increase investment in fixed infrastructure, while 8pc say they will invest more in plant and equipment. On the financial side, 41pc of NSW farmers intend to spend more on farm inputs and 12pc say they intend to invest more in technology and innovation. On the people side of farming business, 13pc intend to increase education and training.
Tim Harvey, general manager CBA Regional and Agribusiness Banking for NSW, said the results show that NSW farmers are looking to increase efficiencies within existing operations.
"As skilled labour becomes more expensive, farmers are turning to new technology and equipment to increase enterprise productivity. This includes larger capacity farm machinery, remote water monitoring, livestock identification systems and site specific crop management,” Mr Harvey said.
Across the state, 6pc of winter grain growers intend to increase production. Cotton and beef are likely to contract in the next 12 months, with 39pc of cotton growers saying they intend to decrease production, and 4pc of beef producers planning to scale back.
“The projected decrease in cotton is due to higher plantings over the last two seasons and the outlook for irrigation storage which is less certain going into the new season. In relation to beef, challenging seasonal conditions in some parts of the state affected sentiment at the time of the survey. However, the long-term outlook for both cotton and beef is strong," Mr Harvey said.
In the west, 34pc of WA farmers intend to invest more in fixed infrastructure over the next 12 months. Other investment priorities for WA farmers over the next year include farm inputs (44pc), farm technology and innovation (17pc), plant and equipment (14pc) and off-farm investments (12pc).
Andrew Hagger, general manager CBA Regional and Agribusiness Banking for WA and South Australia, said these results reflect the buoyant mood following an excellent cropping season for most regions.
"A record grain harvest in WA has strongly positioned many farmers to focus on productivity improvements through investments in infrastructure. Improving fixed infrastructure like on-farm storage, fences and dams, and upgrading plant and equipment helps to increase productivity and navigate seasonal and price fluctuations,” Mr Hagger said.
According to the Agri Insights report, many farmers intend to scale up existing operations in the next 12 months, particularly horticulture (32pc), grains (14pc) and wool (10pc). At the other end of the scale, only 3pc of lamb producers and 2pc of beef producers are likely to increase production.
“The survey results show most commodity sectors look sound, which reflects what we’re seeing in the field. The lower short-term growth outlook for beef and lamb is related in part to the dry conditions in the Gascoyne and Pilbara regions, but beef and lamb are both expected to remain strong in the long-term. Intentions to expand horticulture are driven at least in part by opening up the farming regions in the Kimberley," Mr Hagger said.
Survey respondents were also asked about drought management and the results painted an optimistic picture. The majority of WA farmers (72pc) said they were prepared or very prepared for a two-year drought, compared with 69pc nationally.
The research reveals farmers in SA are more likely than farmers in any other state to increase their investment in further education and skills training (21pc), off-farm investments (20pc) and farm technology and innovation (19 pc).
Mr Hagger said the results illustrate the progressive nature of the South Australian agriculture sector.
"There is an innovative culture in this state, with farmers showing a clear intention to invest in farm technology and research and development. We certainly see this in the field, as farmers optimise their businesses to manage seasonal and price fluctuations," said Mr Hagger.
“The growing number of South Australian farmers looking to increase off-farm investment also reflects what we've been seeing with our own agribusiness customers, who are investing in equities, residential and commercial property, and complementary businesses, as part of a deliberate strategy to diversify their asset base and minimise business risk.
“South Australian farmers are (also) looking to create a better work–life balance through adopting more flexible workplace practices," Mr Hagger said.
From a commodity perspective, 14pc of winter grain growers intend to increase production, as do 9pc of prime lamb producers.
The research reveals farmers in Victoria are especially interested in increasing investment across dimensions of their operations that drive productivity, including farm inputs (46pc), fixed infrastructure (32pc) and equipment (11pc).
Darryl Mohr, general manager CBA Regional and Agribusiness Banking for Victoria and Tasmania, said farmers are looking to invest in on-farm infrastructure because it helps them take control of marketing decisions.
“Farmers are choosing to increase storage capacity to help them select the most beneficial time to bring products to market. For example, on-farm storage allows farmers to choose the most profitable time to sell,” said Mr Mohr.
According to the results, Victorian farmers intend to increase the scale of almost all commodity operations included in the survey. In particular, 16pc of winter grain growers and 13pc of prime lamb producers have intentions to increase production in the next 12 months.
At the same time, 46pc of Victorian farmers intend to spend more on inputs over the next 12 months – more than in any other state.
“Managing rising input costs is an ongoing challenge. High fuel and fertiliser prices and rising labour costs all contribute to input cost growth. The increase in inputs expenditure is also partly due to growth in several commodity sectors,” said Mr Mohr.
On the back of several good seasons in Victoria, the research shows Victorian farmers are among the most likely to say they will increase off-farm investments this year, with 17pc saying they’ll do so, compared to 11 pc nationally.
“Our experience is that farmers are very interested in learning about technologies that will increase business efficiencies and productivity growth. There’s quite a lot happening on this front, from Demo Dairy in south west Victoria to the world-class AgriBio science research centre at LaTrobe University,” Mr Mohr said.
Farmers in Tasmania declared strong intentions to invest in the physical aspects of their farm businesses, including fixed infrastructure (26pc), plant and equipment (17pc) and land acquisition (7pc).
“This is an encouraging signal that agribusinesses in Tasmania are preparing for future growth. The results align with what we are seeing in the field, which is a willingness among farmers to increase land area as part of their strategy to boost the scale of farm production," Mr Mohr said.
According to the research, many Tasmanian farmers intend to scale up existing operations in the next 12 months, particularly in sectors like wool (26pc) and prime lamb (25pc).
In terms of financial intentions, 41pc of Tasmanian farmers say they will spend more on farm inputs.
“Managing rising input costs is an ongoing challenge for farmers. High fuel and fertiliser prices and rising labour costs all contribute to input cost growth. The increase in inputs expenditure is also partly due to growth in several commodity sectors and the appetite to acquire more land,” said Mr Mohr.
On the people front, the research shows farmers in Tasmania are more likely to increase the number of farm employees (13pc) in the next 12 months than farmers in any other state.
The report also showed that 77pc of Tasmanian farmers say they are prepared or very prepared for a two-year drought, which was the highest figure in the country.
The Commonwealth Bank Agri Insights report research was conducted among 1,400 Australian farmers between 17 February and 27 March 2014. Participants were a representative sample of rural producers across Australia. Fieldwork was executed by Fairfax Agricultural Marketing and Research.Author :North Queensland RegisterSource : North Queensland Register