A lower Australian dollar is providing some optimism for the post-farmgate agribusiness sector after a challenging three months.
National Australia Bank’s latest post-farmgate agribusiness survey shows that while the sector experienced a difficult September quarter, expected conditions for the coming 12 months remain in positive territory at +5 points.
NAB’s general manager for agribusiness, Khan Horne, said NAB expected the A$ to continue to weaken, reaching US85c by mid-2015.
“The falling A$ is limiting the impact of downward movements in global wheat and dairy prices, providing a buffer for Australian producers,” he said.
Mr Horne said the primary drivers affecting business confidence in the September quarter were weather (e.g. poor rainfall and frosts), below average rainfall forecasts for the coming months, and lower prices across many agricultural commodities.
Confidence in specific sectors for the coming three months was mixed overall, but protein was the standout, remaining broadly positive.
Sheep meat was up to a wildly optimistic +35 points, despite lower heavy lamb prices, while beef was down slightly to a still-respectable +14, despite the Eastern Young Cattle Indicator rising moderately over the quarter. Poultry recovered to +8.
Confidence in farm inputs increased sharply to +29 for farm chemicals and +36 for farm equipment.
The Survey’s Business Conditions Index dropped two points from -4 in the June quarter to -6 in the September quarter.
However 74 percent of respondents rate conditions as satisfactory, good or very good. The decline in the Index is largely due to a decrease in those who rate conditions as good and an increase in those who rate conditions as satisfactory.
Trading conditions improved slightly, increasing from -2 to zero. Looking ahead, expectations of trading conditions for the December quarter are more positive at +5.
“While conditions have been challenging for many post farmgate agribusinesses, NAB’s outlook for the sector remains bullish, buoyed by a favourable A$ and solid demand conditions in key markets,” Mr Horne said.
- Click here to download the latest NAB post-farmgate Agribusiness Survey.
Agribusiness View provides the latest insights from NAB Agribusiness. Visit nab.com.au/agriview to sign up, as well as to find the contact details for your nearest NAB Agribusiness Manager.