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Although the war in Ukraine is driving up farms' selling prices,
especially for grains, those rises are needed to offset higher
input costs, according to Rabobank, which conducted the survey.
The study found that about 50% of Australian farmers believed
the war in Ukraine would hurt farm businesses. Only 28% expected
business conditions to improve in the next 12 months, compared
with 31% in the previous quarter.
Overall, farmers expected their incomes to be stable for the
coming 12 months.
The bank pointed to spiralling costs of fertilisers, fuel,
freight and machinery - some also driven by the war - plus
broader inflationary pressures in the Australian economy. All
were weighing on sentiment.
Rabobank Australia chief executive Peter Knoblanche said farmers
had enjoyed high agricultural commodity prices for more than two
years, but many now faced margin pressure.
"The cost pressure is not easing and producers definitely need
those higher commodity prices in order to meet rising input
costs," he said.
Rabobank is one of Australia's largest agricultural lenders.
The food price index of the U.N.'s Food and Agriculture
Organization, which tracks the most globally traded food
commodities, averaged 157.4 points in May, up 22.8% from a year
earlier.
"As the next round of (sanctions on Russia) come into force,
there is a lot of caution among farmers about what this will
mean for the longer term, which is flowing through to lower
levels of optimism," Knoblanche said.
Higher input costs have cut margins but the survey found that
farm investment would largely be maintained at current levels.
Australia, one of the world's top exporters of grains, is poised
for a third year of near-record wheat production in 2022 as good
weather encourages planting across its grain belt.
Farmers in Australia, who usually begin sowing wheat in late
April ahead of the southern hemisphere winter, have nearly
finished this year's planting of the grain on about 14.45
million hectares (35.7 million acres), an all-time high,
according to estimates from brokerage IKON Commodities.
(Reporting by Renju Jose; Editing by Bradley Perrett)
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