The hot air surrounding Donald Trump’s first month as US President and some scorching summer weather in eastern Australia have dented the farm sector’s generally upbeat outlook.
But there are few signs of nervousness among sheep producers as the wool market continues enjoying an unusually strong run and lamb remains in hot demand.
Rabobank’s latest Rural Confidence Survey has also noted dairy farmers posting a big confidence lift to levels not seen in almost three years as farmgate milk earnings look set to improve this year and cows enjoy access to abundant home-grown feed and irrigation water supplies.
While Donald Trump's protectionist trade talk, including his decision to torpedo the Trans Pacific Partnership free trade pact, has spooked some in the agribusiness sector, strong market fundamentals for most commodities continue underpinning a largely positive outlook among farmers.
The latest quarterly survey found almost a third of farmers were concerned the new US administration may negatively hurt Australian agriculture in the medium-term, including trade relations between both nations.
However, 32 per cent of farmers still expect their gross farm incomes to be better this financial year than 2016 and a further 50pc expect incomes will be similar.
The run of record eastern states heatwave conditions in January and February caused unease, forcing overall rural confidence to slip back from the highs reported late last year.
The percentage of farmers expecting the agricultural economy to improve in 2017 dipped from last quarter’s 36pc to 25pc.
But fewer reported negative expectations of the farm economy in the next year – 12pc compared with 15pc previously.
Almost 60pc felt the farm economy would perform similarly to last year.
Almost three quarters of those those expecting conditions to get better cited a bullish commodity price outlook as reason for their optimism.
Farmgate prices for most livestock and some crops are expected to come in above their five-year average in 2017.
“The stars have really aligned for those in the livestock industry,” said Rabobank’s national manager Country Banking Australia, Todd Charteris.
He said with sheep and cattle still fetching strong prices in the saleyards, many producers entered summer enjoying good feed and water availability.
Wool prices had risen strongly in recent months, particularly at the finer-end of the market, which drove renewed confidence in the industry.
Meanwhile, the large turnaround in confidence posted by dairy farmers this quarter had been driven by improved expectations for farmgate prices for the southern export-orientated sector.
Producers supplying fresh milk markets anticipated prices to be stable at relatively elevated levels.
However, croppers faced strong market headwinds, particularly wheat producers.
“The sheer abundance of wheat on the global market expected to mute potential price improvement this year,” Mr Charteris said.
The hot summer in eastern Australia had also burnt farmer sentiment in many areas, with only 31pc expecting conditions to improve, down from 68pc at Christmas.
He said much of NSW, southern Queensland, South Australia and parts of northern Victoria sweltered through one of the hottest summers on record which took its toll on the cotton sector, particularly dryland yields.
Unusually, it was a completely different story in Western Australia, with wet conditions during February providing significant stored moisture for the state’s 2017 grain crops.
Investment in on-farm infrastructure remains a key priority, while farmers are also looking to upgrade plant and machinery, increase their livestock numbers and invest in new technologies.
Although, rural confidence levels have eased in most states, Tasmania and WA posted stronger results.
Confidence took the biggest hit in Queensland where the hot summer, particularly on the Darling Downs, has made producers increasingly cautious and the wet season has fallen short of hopes in the parts of the north.