NATIONAL Australia Bank's latest Quarterly Post Farm Gate Agribusiness Survey has found that after a sizeable improvement in December 2011, the index for business conditions in the March quarter fell by 12 points to -10.
The drop was driven by a range of factors including pressure to lower product prices, availability of suitable materials, availability of labour, and the high Australian dollar impacting on export sales.
The bank's general manager of agribusiness, Khan Horne, said the results were consistent with the broader economy.
"Business conditions across most sectors remain subdued and this is also the case for post-farm gate businesses," Mr Horne said.
"Confidence remains mixed across the post-farm gate sector with poultry, wool and cotton up but animal protein (beef, dairy and sheep meat) pulling back," he said.
Trading conditions for post-farm gate businesses weakened in the March quarter falling 14 points into negative territory primarily as a result of a lack of raw materials and pressure to lower prices.
"While trading conditions have weakened, interestingly, issues that impacted in previous months, such as consumer confidence, company-specific issues and the exchange rate, improved," Mr Horne said.
The survey indicated continued pressure on sales margins for many businesses with 24% of respondents reporting a decline compared to 17% seeing an improvement.
"On a positive note, the March quarter saw an increase in the capacity utilisation rate to its highest level since December 2010 and now within 1 percentage point off its historical average at 78.7% ," Mr Horne said.
"This is reflective of a growth in market demand and excess capacity being less of an issue.
"There is no doubt that many post-farm gate businesses are playing the wait-and-see game, cautious of the current environment."
Update your news preferences and get the latest news delivered to your inbox.