DESPITE a three-year drought still gnawing away at most of Queensland and tenuous rainfall conditions in other parts of Australia in recent months, farmers have rarely been more positive about their industry's prospects.
The potential for a cracking harvest in many areas, buoyant sheep and beef markets, the falling dollar and low interest rates have left only 13 per cent of primary producers pessimistic about their prospects according to Rabobank's latest survey of rural confidence.
Since its quarterly surveys began 15 years ago confidence levels have only been stronger in mid-2007, early 2008 and back in 2001.
Although drier than normal El Nino weather pattern predictions continue, the latest Rabo findings showed about 84pc of the 1000 farmers polled still expected agricultural economic conditions to rise or remain firm in the year ahead.
Three quarters of respondents attributed their upbeat expectations to better commodity prices.
More than 41pc expect higher gross incomes in the coming 12 months, particularly in the beef sector, but sugar producers are lagging well behind in their expectations.
The farm business viability index is at a four-year high, with 94pc of farmers seeing long-term viability for their enterprise.
A reassuring drop in the once-crippling Australian exchange rate against the US dollar has been a notable morale booster in the bush, especially with the National Australia Bank (NAB) this week further bolstering its outlook for farm exports by tipping a US68 cent exchange rate in the first quarter of next year.
NAB previously expected our falling dollar - currently struggling to stay above US72c - would bottom out at US71c early next year.
The bank's currency analysts were now factoring in the impact of China's depreciating yuan, plus a likely continuation of weak earnings from Australian mineral and energy exports to China and the rest of the world.
While the dollar's weakness generally means lower terms of trade for all Australian exporters, including the farm sector, NAB's agribusiness general manager Khan Horne said it was good news for farm products competing to secure export buyers against other international traders.
He said this month's accelerating downward trend for the dollar would provide valuable support for local farm commodity prices well into 2016.
It had contributed to NAB also revising up its beef price forecast to average 40pc higher than in 2014-15.
Signs of beef slaughter numbers shrinking and livestock shortages meant the upside for prices was "as high as it has ever been" and was underpinned by solid global fundamentals.
Rabobank's Australian country banking group executive Peter Knoblanche said an overall optimism was prevailing across much of the farm sector thanks to strong commodity prices in the beef, sheep, grain and cotton sectors, generally favourable seasonal conditions and low currency and interest rates.
"Farmers are also generally positive about the future of the industry with agriculture increasingly recognised as an important pillar of the economy," he said.
"This has been demonstrated in initiatives like the federal government's recent agricultural competitiveness white paper."
Farmer confidence was reflected in strong investment intentions, with 25pc of Rabo's survey respondents looking to boost on-farm investment, while 85pc expected their business performance to either improve (44pc) or stay the same as last year.
Tasmania had the highest farmer confidence levels and nearly half its farmers wanted to increase on-farm investment, while in drought-stressed Queensland almost half its farmers expected overall agricultural prospects would improve.
"Record beef prices and strong grain and cotton prices are underpinning much of Queensland's improved sentiment, but drought continues to take its toll with many holding the opinion it can't get much worse," Mr Knoblanche said.
"Good widespread rain in WA in the past couple of weeks is putting farmers back on track for an average to above-average cropping season - potentially their third in a row."
Grain, beef and sheep producers were driving much of the positive sentiment in South Australia, Victoria and NSW, but follow-up rainfall would be critical to the wheat crop's achieving its potential.
While dairy prices here continued outstripping global market values, local industry confidence still fell into negative territory, despite depreciating currency and flexibility in Australia's product mix buffering the downturn's impact on Australian returns so far.
"The weakness in global dairy markets is weighing on the minds of dairy farmers."
Andrew Marshall
National agribusiness writer for Fairfax Agricultural Media.
National agribusiness writer for Fairfax Agricultural Media.
