A RECENT survey has shed some light on farming confidence for the year ahead.

The Rabobank Rural Confidence Survey, released on Wednesday, showed Victorian farmers had bucked the national trend and reported an improvement in overall net rural confidence levels, following recent step-ups in milk contracts and ongoing strength in the beef cattle trade.

The national trend has seen confidence fall for the third consecutive quarter, and Victorian farmers remain cautious.

Nationally, rural confidence levels slipped lower for the third consecutive quarter.

Farmers are also starting to acknowledge the potential impact the conflict in Ukraine could have on Australian agribusiness, with more than 50 per cent expecting a negative or very negative impact on their own business as a result of the European conflict.

The survey found 31 per cent of Victorian farmers are expecting business conditions to further improve in the year ahead, up from 23 per cent last quarter.

 Of the Victorian farmers surveyed, 47 per cent believed conditions will remain stable.

Rabobank regional manager for Southern Victoria, Deborah Maskell-Davies said the climate and commodity price outlook were both very healthy across all sectors, but pressure on margins from high input and production costs was tempering optimism about the year ahead.

Ms Maskell-Davies said commodity prices were found to be the primary driver of optimism in the sector, with the new-season dairy pricing clearly a standout.

“The current high pricing we see in the dairy sector is really capping off a number of profitable years,” she said.

“But all farmers, not just those in dairy, are closely monitoring rising costs for key inputs like fertiliser, fuel and even interest rates, and expressing concerns about what is becoming a fiercely-competitive labour market.

“While these rising costs are being offset by high commodity prices at the moment, any reduction in those prices will put pressure on margins as production costs are just so high.”

In Victoria’s sheep sector, solid demand for lambs and increasing fine wool prices have been good news for producers, although challenges with processing capacity and supply chain disruptions continue to impact the industry.

Seasonally, Ms Maskell-Davies said, conditions have been varied across the state, with a late break in the state’s south west meaning producers headed into winter with less feed than usual, and demand for feed and grain in these areas is now high as a consequence.

Successive years of good seasons and strong returns had strengthened farm viability and put producers in a good, long-term position.

The survey found 36 per cent of Victorian farmers are forecasting higher gross farm incomes in the year ahead, while 41 per cent expect their incomes to remain the same as the past year.

These strong income expectations are feeding into solid investment projections for the 12 months ahead – with more than 90 per cent of Victorian farmers surveyed planning to maintain or increase investment in their farm businesses.

On-farm capital works – such as fences, silos and machinery – were the dominant investment focus, while intentions to purchase property and expand existing farming operations had dropped off significantly among those Victorian farmers planning to increase investment.

“From my discussions with farmers, it’s clear many are still wanting to expand but there is either nothing for sale, or there are many parties vying for the same property,” Ms Maskell-Davies said.

However, she said, there was definitely a feeling among farmers that rural property prices “can’t continue escalating like they are at present”, yet there were still a lot of balance sheets with capacity to grow and borrow, which could ultimately keep demand high.