Below trend growth to continue
Post-farmgate agribusiness conditions rebounded in the June quarter to be mildly positive but confidence fell marginally. Customer demand remains the single most significant constraint to businesses’ future profitability. Expectations for capex plans surged to the highest in two years.
Post-farmgate business conditions rebounded
Business conditions rebounded on a devaluing exchange rate and lower interest rates
In the June quarter, a number of significant weather and economic developments have influenced business conditions and confidence of post-farmgate businesses. First of all, the long-awaited autumn break arrived in late May, with decent rains across most parts of the country replenishing the much needed subsoil moisture critical for the growth phase of the newly planted winter crops. Secondly, the Reserve Bank ofAustraliacut the cash rate by 25bps to 2.75% somewhat unexpectedly in May, which served as a catalyst that sparked a period of sustained falls in the exchange rate, to be 12% lower over the three months to the end of Q2. Perhaps then not surprisingly, more survey respondents reported good conditions than poor in the quarter. Driving the rebound in the business conditions index had been broad-based increases across the three key components that make up the index: employment, trading and profitability.
Protein exports continued to grow at robust pace in the quarter, with beef exports reaching a monthly record high in May. However, the movements in the agribusiness result are in contrast to that of industry overall, which suggests that conditions during the June quarter have deteriorated. Post-farmgate agribusiness confidence remained in negative territory following a minor deterioration of 2 points to -11, largely reflecting the still-weak expectations on export sales, sales margins and profits.
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