Rising input costs and lower commodity prices have WA farmers farmers feeling worried about the year ahead

Rising input costs combined with a lower agricultural commodity prices have WA farmers feeling more pessimistic than they have in three years, with their worries “taking the edge off” what is shaping up to be a stellar season for the State’s agriculture sector. The latest Rabobank Rural Confidence survey — released on September 13 — showed nationally, a fear of a foot-and-mouth disease incursion was also weighing heavily on optimism in the farm sector in the latest quarter. Optimism was strongest among cotton, dairy, sugar and grain producers. Mixed livestock producers were the most pessimistic group of those surveyed with 85 per cent “extremely concerned” about the threat of an FMD outbreak. FMD was confirmed in Indonesia in early May for the first time since 1986, sending farmers and biosecurity officials into overdrive to try and prevent the spread of the disease that could cause an $80 billion hit to the nation’s economy. WA farmers in particular were concerned about high operating costs and lower agricultural commodity prices, despite the expectation the State’s grain growers will harvest their second biggest crop at 21.4 million tonnes in coming months. Struggles getting grain to port after WA’s record 24.3Mt harvest in 2021-22 have depressed prices for grain farmers, with many claiming they are receiving $50 to $100 per tonne less than their Eastern States and international counterparts. Despite this, appetite for land purchase is the highest in WA — where arable land surged 36 per cent in value last year to a median of $2750/ha, with grazing land up 31 per cent to a median of $14,800/ha, according to Rabobank research revealed this month. Nationally, rising operational input costs combined with fears of an FMD incursion weighed heavily on optimism in Australia’s farm sector in the latest quarter. Despite extraordinary strength in farm balance sheets and the overall health of the sector following more than two years of high rainfall and good commodity prices, more farmers now believe conditions are set to worsen during the year ahead. It was the first time rural confidence nationally had moved into negative territory since December 2019. Rabobank Australia chief executive Peter Knoblanche attributed the downturn in confidence to the mounting cost of farm inputs including fuel, fertiliser, energy and building materials. He said while the nation’s farm sector was in a very healthy state financially, there were several challenging or concerning factors now clouding what was previously a largely overall positive outlook. “Long term, I think farmers are still very confident about agriculture,” Mr Knoblanche said. “There is good domestic and worldwide demand for our rural commodities, productivity and profitability is high and farmers have done very well rebuilding after the drought and building greater resilience into their businesses. “However, margins are starting to come under pressure from the ongoing rise in input costs, and farmers are carefully monitoring and managing those costs. “And there is definitely some anxiety among livestock producers about the heightened threat of an FMD incursion, and the potential impact this would cause should it enter Australia.” Despite this, nearly half of the farmers surveyed said believed conditions would largely remain the same during the year ahead. Just 14 per cent of farmers nationwide expected agribusiness conditions to improve on last year, down from 28 per cent last quarter, while 43 per cent expected current conditions to continue — down 52 per cent. The number of farmers expecting business conditions to deteriorate rose to 36 per cent, from 16 per cent in June. Of those expecting conditions to worsen, 44 per cent cited the rising cost of input prices, 40 per cent blamed concerns about falling commodity prices while 39 per cent said the threat of FMD had influenced their sentiment. For those farmers tipping conditions to improve in the next 12 months, sustained above-average commodity prices were the dominant factor underpinning positive sentiment, followed by favourable seasonal conditions.