Media

5 November, 2007

Australian farmers' business confidence has reached its lowest level this year according to the latest quarterly Westpac & Charles Sturt University (CSU) Agribusiness Index.

Only 60 per cent of farmers are confident about the summer season – a decline from a record high of 77 per cent just three months ago. Capital expenditure, stock levels, employment and profit margins have stalled while operating costs increased, albeit at a slower rate than during the June quarter.

The Westpac & CSU Agribusiness Index produces an Economic Performance Index (EPI) between -1 and 1 based on the average of results. Sitting at -0.12, the national EPI is at its lowest level since the Westpac & CSU Agribusiness Index began in December 2006, and is expected to plateau into the next quarter.

Graham Jennings, Westpac's Chief Executive, Regional and Agribusiness Banking, said customers should be seeking advice on how to rein in costs or access additional assistance in preparation for a tough summer season.

"This survey showed that of the 54 per cent of farmers living in an exceptional circumstance (EC) declared area barely a third (31 per cent), had applied for, or were receiving financial aid," Mr Jennings said.

"EC assistance may not be applicable for every farmer, but they should be talking to their banker about any extra protection or support they can access to maintain their businesses during these particularly difficult times.

"Westpac may be a national business but we're comprised of local people and networks. The key to helping our customers come out of this drought ready to re-build their businesses is developing these connections with the local communities where our Agribusiness teams are based. We're committed to long-term recovery and support initiatives."

In a series of one-off questions about stock and crop activity, of those farmers surveyed only 43 per cent had planted a winter crop with less than half of those farmers (41 per cent) expecting to harvest a full crop.

The crop results were worst in New South Wales where the highest proportion of farmers (21 per cent) indicated they would use their crop for other purposes. Conversely, in Western Australian, 72 per cent of farmers with a crop were expecting to harvest in full.

Seventy-four per cent of producers surveyed had stock on their property with just 41 per cent expecting to sell similar numbers to last year and only 36 per cent hopeful of selling more. Of those farmers that expected to sell more stock this year, 41 per cent cited lack of feed as the main cause.

Key September quarter State and Territory results include:

• Queensland recorded its fourth quarter of negative business performance with an EPI of -0.08. While business confidence for the next 12 months is the nation's second highest at 70 per cent, the EPI is expected to dip further into the next quarter.
• Western Australia was the nation's strongest agricultural State and, while farmer confidence dropped to 66 per cent from 72 per cent, farmers experienced strong performance. The only State to record a positive EPI of 0.04, producers reported their first positive economic performance in four quarters.
• Tasmania's EPI continued to decline yet 71 per cent of farmers are confident of a return to positive territory in the next quarter. Overall, Tasmanian confidence levels have remained steady throughout 2007, varying by only 3 per cent in this period.
• New South Wales experienced the nation's worst performance this quarter with an EPI of -0.19. A low 51 per cent of farmers are confident about the year ahead, compared to 82 per cent in the June quarter.
• Victoria reported mixed performance. Whilst Loddon and Western District improved into positive territory, the overall EPI deteriorated to -0.15 and confidence fell to an all-time low of just 54 per cent. Expectations are for further declines into the summer months.
• South Australia was the second hardest hit State after New South Wales, with an EPI of -0.15 after showing some performance lifts during both the June and March quarters. The State's business confidence sits at 66 per cent, although surprisingly Eyre, the worst performing district, recorded confidence levels of 81 per cent.

Westpac Senior Agribusiness Economist, Justin Smirk, said that while high commodity prices and positive longer-term global outlooks warranted confidence in the local industry, without significant rains there was unlikely to be any immediate performance lifts.

"The overall mood is that, despite such an optimistic start to the winter season, the lack of follow-through on early rains has left farmers with a tough summer ahead," Mr Smirk said.

"While high commodity prices, and the strength of the general economy, might be offsetting some of the effects of the drought, especially in the South East corner, many farmers will be writing off 2007 and instead concentrating on 2008."

With more than 450 staff in Regional and Agribusiness banking across Australia, including 150 experienced Agribusiness specialists who are passionate about their work, Westpac is committed to delivering the right long and short term solutions for its rural and regional customers.

For more information on Westpac's products and services for agribusiness owners talk to your local Westpac Agribusiness Banker or call 1300 134 979.

About the Westpac & CSU Agribusiness Index

The Westpac and CSU Agribusiness Index is a quarterly survey of Australia's Agribusiness sector conducted by the Western Research Institute of Charles Sturt University. A survey is conducted via a phone questionnaire with respondents drawn from the 48 statistical divisions of regional Australia with a mix of both primary producers, and businesses upstream and downstream of the agricultural sector. The September 2007 survey resulted in 1196 responses.