Agribusiness still doing it tough

Posted by Josette Dunn on 19th February 2010

The latest NAB Quarterly Agribusiness Survey shows post-farmgate conditions and confidence declined in the December quarter, as weak domestic and export demand led to deteriorating trading conditions and profitability.

Demand was reported as the major concern for agribusiness respondents with 35 per cent expecting it to be the main constraint to profitability over the next 12 months.

NAB’s General Manager of Agribusiness, Khan Horne, said that agribusinesses were feeling the pinch due to the high Australian dollar and increased farmgate prices.

“While the broader economy is feeling optimistic, agribusinesses have a heavy reliance on exports. This means that they are feeling the effects of the slow global economic recovery, which lags significantly behind Australian conditions,” Khan said.

Contrary to the expectations in the last survey, export sales have fallen and forward orders are still weak, which has resulted in a decrease in anticipated capital expenditure over the coming year.

“Also, the recent favourable weather that has resulted in a significant increase in livestock prices, mostly due to low yardings and high demand from restockers, puts further pressure on the post-farmgate sector.

“Reflecting this, agribusiness profitability performance declined over the December quarter due to tighter sales margins.

“However, generally the sector is feeling optimistic, with respondents looking forward to increased profits in the March quarter as a result of a recovery in trading conditions,” Khan said.

While capacity utilisation remained flat in the agribusiness sector over the December quarter, job losses continued to stabilise.

“While employment has not increased as much as in the wider non-farm businesses where employment increased over the past quarter, hopefully the post-farmgate sector will follow trend, as it now appears the peak in the Australian unemployment rate passed at 5.8 per cent in the September quarter 2009.