Positive trends in post-farmgate market conditions

NAB Agribusiness general manager, Khan Horne.
NAB Agribusiness general manager, Khan Horne. Contributed: Thomas Kane

POST farmgate agribusiness conditions have lifted on the heels of the continuing rally in global equity markets and more positive news from trading partners such as China and the United States.

The result, in the latest National Australia Bank Agribusiness quarterly survey, highlights a shift of the post-farmgate agribusiness conditions index into positive territory for the first time since December 2011.

NAB Agribusiness general manager Khan Horne said the shift in the December quarter 2012 reflected a more buoyant outlook being seen on the ground. 

"There were increases in all three components in the index, with employment conditions a driving contributor. Trading conditions have also jumped from neutral to +10, which is the best reading since the September quarter 2011. Consumer confidence has been a major factor, reflecting a more upbeat global growth outlook," Mr Horne said.

"However, similar to the broader economy, demand continues to weigh on post-farmgate agribusinesses with 56% of respondents citing sales and orders a key constraint on output."

Profitability rose 11 points due to lower input costs helping to stretch margins but remained subdued at -3.

Despite the improvements, agribusiness confidence remains in negative territory at -13, possibly reflecting weak expectations about orders, high and rising crop prices, and adverse sentiment in poultry and sheepmeat.

"The high Australian dollar, although showing signs of moderation lately, is still impacting on export sales conditions," Mr Horne said.

"However, it's helping keep the cost of imported equipment in check and this, along with current low prices of fertilisers, has helped increase both the confidence indices for farm inputs.

"Post-farmgate confidence in crops broadly deteriorated, with sugar down significantly against a backdrop of global surplus stocks, and wheat falling sharply on the back of high prices.

"Confidence in animal proteins was down across the board. Sheepmeat and poultry indices hit the lowest levels since the start of the series in 2006.

"For fibres, increased prices for wool and raw cotton have pushed the indices broadly lower."

Mr Horne said medium-term expectations remain robust, with expectations for post-farmgate businesses largely optimistic for the next 12 months.

Topics:  agribusiness commodities markets nab agribusiness

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