Positive outlook leads to machinery sales boost

By: Randall Johnston

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Australian farming industry confidence is up according to the latest Rabobank Rural Confidence Survey. Australian farming industry confidence is up according to the latest Rabobank Rural Confidence Survey. Australian farming industry confidence is up according to the latest Rabobank Rural Confidence Survey.

Good summer rainfall and solid commodity prices have boosted farmers’ investments — including agricultural machinery — this year.

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Australian farmers across all sectors are increasingly optimistic about their financial prospects in the year ahead, according to the latest Rabobank Rural Confidence Survey.

Farmers’ appetite for investment is now at a near four-year high, with more than a quarter now looking to increase investment, specifically by upgrading their machinery.

This is good news for the farming machinery industry, as improved economic outlook for farmers naturally leads to a willingness to invest in new gear, and heavy tractor sales are up significantly in the first quarter of 2016.

"The increase in farming confidence pretty much flows into tractor sales for the first quarter," Tractor and Machinery Association of Australia executive director Richard Lewis says.

"Small tractor sales are down, but that’s not really a farming-dependant market.

"We are seeing growth in the 200hp-plus market for tractors, which is up by about 15 percent."

Farming confidence has increased in all areas except in Western Australia where it remains steady, according to the report.

"It’s pretty mixed across the county," Lewis says. "In New South Wales, for instance, things have improved dramatically, but some areas in other states are still very dry."

While the report claims grain and livestock farmers are the most optimistic, dairy farmers are more cautious at the moment.

"Murray Goulbourn is likely to drop the price of milk this week, which is not good news for dairy farmers but other sectors seem to be doing pretty well," Lewis says.

While solid commodity prices are a factor, the availability of cheap credit is another.

"Really cheap interest rates are a huge driver for farmers to buy land and machinery," Lewis says.

"Dealers are offering pretty good terms and finance companies are offering really good rates, which is a perfect storm to encourage investment."

Changes in the value of the Australian dollar haven’t has as much of an impact as Lewis and others in the industry expected.

"Machinery prices haven’t risen much in Australia over the last year, although they were expected to," he says. "Globally the cost of machinery has gone up, but not so much here."

Much of the optimism stems from good levels of rainfall, especially for the southern half of Australia.

"After good January rains, which were above-average for most of the southern half of the country, there has been limited rain to speak of in many regions through February and into March," Rabobank national manager country banking Australia Todd Charteris says.

"Thankfully, though, there have been some significant falls across Queensland and parts of north-western New South Wales which have been struggling with ongoing drought conditions. But there are still areas there in desperate need of follow-up rain – if indeed, they received the initial falls."

Farmers are hopeful that the weakening El Nino weather system will bode well for rainfall and lead to good yields and levels of production generally, according to Charteris.

Nearly half of the survey respondents cited seasonal conditions as the reason they expected conditions to improve over the coming year, and solid commodity prices also remained a significant factor, especially among beef and sheep graziers as prices remain around record levels.

"The solid lift in overall rural confidence means investment, gross farm incomes and farm business performance are all set to increase this year," the report says.

"Increasing livestock numbers is also high on the agenda, particularly rebuilding the beef herd in Queensland, as is new plant and machinery."

Investment intentions are at a four-year high, with 91 percent of the nation’s farmers expecting to increase or maintain their level of farm business investment over the coming year, according to the report.

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