Australia | Feb 07 2008
By Chris Shaw
While recent rains have improved conditions the drought remains a key concern for Australia’s agricultural sector, National Australia Bank’s latest Quarterly Agribusiness Survey showing 7% of respondents saw it as impacting on trading conditions.
Despite this the survey shows an improvement in agribusiness conditions over the December quarter, reflecting stronger demand, improved profitability and a more stable employment environment.
The survey found the improved conditions were spread across most sub-sectors, with the strongest gains being recorded in transport and manufacturing, while conditions in retailing and wholesaling continue to prove difficult.
Outlook comments were also generally positive, the bank noting agribusiness respondents continue to have relatively strong capital expenditure plans for the coming year.
While costs pressures remain the bank points out this was to some extent at least offset by higher prices, while an expected moderation in cost pressures in the coming quarter should in its view reduce the downward pressure on margins being experienced, driving a small increase in profitability in the sector.
The drought and a lack of demand continues to prevent a better improvement in profitability according to survey responses, while interest rates and the availability of suitable labour are also seen as hurdles to be overcome this year.
In actual numbers the survey showed a three point drop in agribusiness confidence to a reading of 0, with the wheat, beef and cotton sectors all recording relatively sharp falls on the back of poor seasonal factors. In contrast dairy rose three points while the sugar sector showed only a minor change in outlook.
A number of operators in the sector took out hedging during the period to offset concerns over the direction of the Australian dollar, though the bank notes the proportion reporting favourable hedging positions fell from around 45% in the previous quarter to around 22% for the December quarter.
