The rain came too late for the summer crop but it should help the winter crop.RECENT rains and the weaker Australian dollar should underpin demand for crop inputs heading into the winter cropping season and help farmers pay down debt, Elders chief executive Mark Allison says.
Nanjing Night Net

Mr Allison, who took charge of the iconic rural services group in April, said farmers were always battling conflicting forces but some major factors had turned in their favour.

The currency is trading at US77.6¢, compared with about US90¢ in September, and the fall will make farm exports more competitive.

Alongside the slide in the dollar, solid rain across cropping and pastoral land in the past six weeks has improved short-term prospects and eased the pressure on some farmers struggling with dry conditions.

“We should see a reduction in debt and areas with good conditions should see an expanded area for the winter crop,” Mr Allison said. “The rain came too late for the summer crop but it should help the winter crop. Those expanded [crop] volumes will give farmers, particularly in Western Australia, a chance to pay down debt and more cash for discretionary spending.”

Listed agribusinesses such as Elders, GrainCorp, Nufarm and Incitec Pivot have significantly outperformed the broader market since the beginning of January.

The improved outlook for the winter crop – which is significantly larger than the summer crop – bodes well for volumes and demand for products such as fertiliser and herbicides.

Mr Allison said farmers in north-western NSW were already putting in pre-plant ammonia ahead of winter planting.

There could be further support from a lower currency on the way.

Reserve Bank governor Glenn Stevens on Friday suggested that the central bank believed the dollar had further to fall. The hint that the bank would maintain an easing bias, despite cutting rates to a record low of 2.25 per cent this month, should put continuing downward pressure on the dollar.

Elders stock has surged 22 per cent to $2.93 since the start of the year, giving the company a market value of $245 million.

Mr Allison said Elders’ own recent history – of getting into trouble with debt, deleveraging and then cutting the cost base to a level sustainable throughout the cycle – was playing out across the wider agricultural sector.

The rain has buoyed cattle prices across the north and east of Australia and the pressure to dump stock has eased for some drought-stricken pastoralists.

At the same time the free-trade deals struck with China, Japan and South Korea have renewed confidence that primary producers will have access to markets hungry for their produce.

Mr Allison said the Abbott government’s move to increase scrutiny of foreign investment in Australian farmland would not damage trading relationships.

“My view is it won’t have much of an impact at all, although many grower groups will take comfort in the greater transparency,” he said.

Last week the government honoured an election pledge in announcing it would tighten screening of the cumulative value of foreign purchases of farmland.

Purchases subject to approval by the Foreign Investment Review Board will be lowered from $252 million to $15 million.

While export markets for cattle and beef are looking strong, exports of dairy heifers from Southern Australia to Asia are dwindling.

The collapse in milk powder prices, sparked by new supply primarily from Europe, has hit demand for dairy heifers.

Investors will get an update on the state of play in dairy markets when ASX-listed Bega Cheese reports earnings on Friday.

This story Administrator ready to work first appeared on Nanjing Night Net.