Rabobank’s quarterly Rural Confidence Survey has revealed that Australian farmers begun 2026 with lower confidence, even before the start of the current Middle East conflict. Rural confidence has slipped to a net reading of -9 per cent, which is down from six per cent in the previous survey.
Cost pressures were already at the front of mind of producers
The survey was conducted prior to the outbreak of conflict in the Middle East, suggesting that conditions for farmers have since worsened. Farmers had already entered the year under pressure – facing high input costs, mixed seasonal conditions alongside drought, floods and bushfires across different regions.
“We’ve seen fuel and fertiliser markets and freight rates react to the Middle East conflict due to the impact on prices and threat to supply,” he said. “This flows directly into Australian farm budgets, adding to inflationary pressures,” said Rabobank group executive for Country Banking Australia, Marcel van Doremaele.
Fertiliser supply disruptions, especially for nitrogen-based products, combined with higher shipping costs and volatile fuel prices, are adding strain as farmers prepare for winter cropping.
“Some farmers are rethinking the application of nitrogen in particular as a result of high prices and some crop farmers are adjusting their cropping programs,” Van Doremaele said. “For graziers, increased fuel prices add to costs, particularly for transport.”
Strong livestock prices help offset broader sector challenges
Despite the challenges, commodity prices are providing some optimism, and this is particularly true across Australia’s livestock sectors. Strong global demand has kept finished cattle prices near historic highs, while lamb and mutton prices are expected to remain elevated. In the fibre sector, wool has also held steady, and dairy prices have recently lifted.
However, confidence remains mixed across commodities. For example, grain growers recorded one of the sharpest declines in sentiment, falling to -33 per cent – reflecting global oversupply and weaker prices earlier in 2026.
Dairy confidence also dropped sharply to -29 per cent, due largely to tough seasonal conditions and higher costs for water. Sheep producers remain the most optimistic commodity group, while sugarcane was the only sector to record an improvement in confidence.
State-by-state results highlight uneven conditions across Australia
Sentiment softened across most states. South Australia was the only exception, recording a modest lift that was supported by a strong harvest and favourable rainfall.
Tasmania remains the most optimistic state overall, and Queensland’s confidence fell to -10 per cent, reflecting highly variable seasonal conditions, including both record rainfall and flooding.
Western Australia also saw a decline to -11 per cent, with producers balancing strong harvest outcomes with rising costs and global uncertainty.
Outlook softens as caution grows around future conditions and spending
Looking ahead, half of Australian farmers expect conditions to remain stable over the next year. However, pessimism continues to rise. Around 28 per cent of farmers expect conditions to worsen, which is up from the 22 per cent last quarter. Optimism has since fallen to 19 per cent.
Investment intentions have eased slightly, with fewer farmers planning to increase spending, although most intend to maintain their current levels. On-farm infrastructure remains a key priority, with two-thirds of those surveyed planning on capital expenditure in areas such as fencing, yards and silos.
Farm sector faces another test of resilience amid ongoing uncertainty
Van Doremaele said that farming is entering a challenging period, but the industry has proven that is well equipped to navigate and adapt to conditions in Australian and abroad.
“As we have seen over the years, farmers have navigated geopolitical shocks and challenges such as draughts and floods,” he said. “These current challenges present themselves as a new test of the resiliency and adaptability of the country’s farmers and graziers.”
With input costs continuing to rise and global uncertainty intensifying, the next quarter’s results are likely to provide a clearer picture of how deeply these pressure are actually impacting Australia’s agricultural sector.