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National Australia Bank today announced the release of its new Quarterly Agribusiness Survey - believed to be the first of its type in Australia. The Survey has been specifically designed to report business conditions and confidence levels in the Australian agribusiness sector - and as such it covers "post farm-gate" production and processing (i.e. excludes primary producers per se).
In order to provide more meaning to the survey results (one of the key problems of interpretation with any new survey's output), agribusiness has been included as a new cohort in the long-running and widely used Quarterly Business Survey (QBS) of non farm sector - which reports responses from a sample of around 1300 firms. This special agribusiness cohort provides results of survey responses from around 100 small/medium to large sized agribusiness companies, drawn mainly from the food manufacturing industry, but also including wholesaling and a number of other sectors.
Accordingly, this allows conclusions to be drawn as to how agribusiness is travelling relative to the non-farm business sector as a whole. Results have also been reported in a similar format to that used in the QBS. Some limited time series data has also been provided, as responses from the agribusiness cohort have been collected (but not separately reported), since the September quarter 2000.
As well as the usual reporting measures (business conditions, confidence, forward orders, stocks, exports, prices, wages, capital spending plans, capacity utilisation and longer-run business expectations), the Agribusiness Survey also contains a special business confidence index constructed according to participants views of their own industry, at a more disaggregated level. In total, this covers businesses associated with 10 key industry/commodity groupings (e.g. wool, wheat, etc.).
The key results of the Agribusiness Survey for the June quarter 2001 (and 3 previous quarters) are set out in the attached report and data indices. In commenting on some of the key findings, the National's Chief Economist, Alan Oster, drew attention to the following:
- in marked contrast to the total QBS results, agribusiness business conditions remained at relatively high levels in the six months to March 2001, buoyed by the low currency. Subsequently, business conditions in the June quarter eased significantly as the global slowdown started to take effect. See chart below;
- similar trends are evident in forward orders and exports (see chart below). It is also noticeable that expectations for the September quarter for both the agribusiness and the broader economy are for much stronger outcomes - a result which has been borne out to date in subsequent monthly surveys for the broader economy (but less so for agribusiness).
- as expected, a much larger proportion of agribusiness is export orientated (45 per cent), relative to the broader economy (31 per cent) - with a much higher proportion of their export receipts hedged (51.9 per cent vis-a-vis 30.5 per cent);
- at an aggregate level, agribusiness confidence was higher in early 2001 than the broader economy and while it has improved moderately in the June quarter (likely due to the still weak currency ), that improvement is much less than the surge in business confidence in the broader economy (where lower interest rates and special initiatives in housing had a much more marked influence);
- across industry/commodity, there are wide differences in agribusiness confidence, with businesses associated with products such as beef & veal, wheat, wool and sugar, much more optimistic than the non-farm economy on average. Against that relatively low levels of confidence are evident in businesses associated with cotton, dairy (no doubt in part reflecting local deregulation issues) and farm equipment (where lower levels of farm investment are clearly hurting). See chart below.
Finally, it is worth noting that, although not separately reported, the agribusiness cohort has also been included in the National's Monthly Business Survey. Results to July continue to reflect weakening conditions in agribusiness, in the face of the emerging global slowdown.
View the Quarterly Agribusiness survey - June Quarter 2001.
Results for the National's Quarterly Agribusiness Survey will in future be published on an on-going basis around the time of the National's full QBS - with the next survey results due in early October.
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