Post‐farmgate business conditions surged

• Post-farmgate agribusiness conditions deteriorated in the March quarter to be mildly negative to be more consistent with underlying trends.
• Customer demand remains the single most significant constraint to businesses’ future profitability.
• Despite weaker business conditions, expectations for capex plans surged as businesses seek to take advantage of the current low interest rates.

Business conditions could not hold on to gains

After a positive result in the December quarter, the March quarter result has relapsed into negative territory, to be more consistent with the negative pattern observed in the three quarters prior to the December quarter. This suggests that perhaps the December quarter result was more of a “blip” in the data due to seasonal factors than an accurate representation of the underlying trend, which appears to be still weak. On balance, more survey respondents reported poor conditions than good. Driving the result were broad-based decreases across the three key components that make up the index: employment, trading and profitability, trading conditions registering the sharpest drop.

Strong protein export demand in the December quarter due to the holiday season and Lunar New Year which followed would have skewed the result in the quarter somewhat. However, it is worth mentioning that the movements in the agribusiness result are in contrast to that of industry overall, which suggests that conditions during the March quarter were relatively more favourable. Agribusiness confidence remains in negative territory following a minor deterioration of 2 points to -9, possibly reflecting weak expectations on export sales, sales margins and adverse sentiment on wheat and farm equipment.

For further analysis download the full report.

• Quarterly Agribusiness Survey – March 2013 (PDF 1129 KB)