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Victoria in the December Quarter of 2006

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Victoria in the December Quarter of 2006 Agribusiness Index December Quarter 2006 This report discusses the Westpac / Charles Sturt University (CSU) Agribusiness Index for Victoria in the December Quarter of 2006. Mallee The index is based on a nationwide survey of 1,200 businesses in the agribusiness sector. Similar reports are available for each state as well as an overall national report. Ovens-Murray Wimmera Loddon Goulburn The survey includes agricultural producers as well as suppliers to agriculture Central Highlands East Gippsland (upstream) and related transport, Western District manufacturing, wholesale and retail Barwon businesses (downstream). The aim of the Gippsland survey is to provide a timely snapshot of agribusiness across Australia. The Economic Performance Index (EPI) is the average of results for business performance, employment and investment (capital expenditure). The EPI for Victoria by statistical division is shown on the adjacent map. Victoria had an overall negative score on the EPI in the December Quarter, with negative results in business performance and capital expenditure largely due to climatic conditions. Statistical divisions in the far west of the state recorded the worst EPIs, mainly due to negative results in business performance and capital expenditure. Goulburn statistical division reported the worst employment conditions in the state while East Gippsland and Gippsland statistical divisions reported positive EPIs. Downstream agribusinesses reported positive business performance, driven by consumer demand. Producers and upstream agribusinesses reported negative performance, largely due to climatic conditions. Gippsland statistical division was one of the best performing statistical divisions in Australia, with positive business performance and employment. “Been on the land for 33 years and have never seen anything like the drought we are in right now.” Victoria Producer, East Gippsland. PERFORMANCE INDICATORS Business Performance On average, agribusiness participants in Victoria December Qtr March Qtr Outlook experienced negative business performance in the Barwon -0.02 -0.21 December Quarter of 2006. Central Highlands -0.05 0.12 ■ The statistical divisions in the west of the state, including East Gippsland 0.00 -0.40 Mallee, Western District and Wimmera, all reported poor Gippsland 0.19 -0.08 business performance. Goulburn -0.25 0.07 ■ Only Gippsland and Loddon statistical divisions reported Loddon 0.03 -0.03 positive business performance, with East Gippsland at a Mallee -0.46 -0.39 satisfactory level. Ovens-Murray -0.13 -0.01 ■ Six of the ten regions expect improved performance in the March Quarter, however the general outlook is still Western District -0.58 -0.19 negative. Wimmera -0.56 -0.15 Victoria -0.21 -0.12 Climate (including drought and frost) had the greatest negative impact on business performance in Victoria, while Fuel Victoria consumer demand was the most positive infl uence on Wimmera Climate performance. Western District ■ Climate was of least signifi cance in Loddon statistical Ovens-Murray Seasonal division. Mallee Loddon Economic ■ Seasonal factors were most infl uential in East Gippsland, Climate Goulburn Barwon and Ovens-Murray statistical divisions. Marketing Gippsland ■ Consumer demand was of most signifi cance in the East Gippsland Internal Central Highlands statistical division. Factors Central Highlands ■ General economic climate was most signifi cant in Mallee Consumer Barwon Demand statistical division. 0% 20% 40% 60% 80% 100% Other Negative performance across Victoria was heavily infl uenced by the performance of producers and upstream businesses. December Qtr March Qtr Outlook ■ Upstream businesses reported negative performance in the December Quarter, infl uenced most by climatic Upstream -0.21 -0.30 conditions. Producers -0.23 -0.10 ■ Producers experienced negative performance on Downstream 0.13 0.10 average, climate contributed most to this result. Victoria -0.21 -0.12 ■ In addition to climate, downstream businesses were signifi cantly impacted by consumer demand. Fuel ■ Despite producers expectations for improvement in the March Quarter, upstream and downstream businesses Downstream Climate expect a decline in overall performance. Seasonal Producers Economic Climate Marketing Upstream Internal Factors Consumer Demand 0% 25% 50% 75% 100% Other N.B. Each indicator is measured by a weighted average on a scale from -1 to 1, where 0 signifi es satisfactory performance. Results less than -0.33 are considered to be poor, between -0.33 and 0 negative, between 0 and 0.33 positive and greater than 0.33 good. Agribusiness Index 22 PERFORMANCE INDICATORS Capital Expenditure On average, capital expenditure by the agribusiness sector December Qtr March Qtr Outlook declined in the December Quarter. Barwon -0.31 0.23 Central Highlands -0.39 -0.10 ■ East Gippsland was the only statistical division to report increased investment. East Gippsland 0.13 -0.32 Gippsland -0.11 0.00 ■ Seven of the ten statistical divisions expect to increase Goulburn -0.14 -0.31 capital expenditure in the March Quarter. Loddon -0.07 -0.09 ■ The decline in capital expenditure was most evident in Mallee -0.34 -0.19 the producer sector. Ovens-Murray -0.17 -0.02 Western District -0.29 0.08 Wimmera -0.47 -0.30 Victoria -0.21 -0.11 Employment December Qtr March Qtr Outlook On average, employment in agribusinesses declined slightly Barwon 0.05 -0.16 in the December Quarter. A similar decline is expected in Central Highlands -0.15 0.03 the March Quarter. East Gippsland -0.07 -0.12 Gippsland 0.12 -0.09 ■ Barwon, Gippsland and Loddon statistical divisions reported increased employment in the December Goulburn -0.26 -0.12 Quarter. Loddon 0.02 -0.10 Mallee -0.09 -0.18 ■ On average, all sectors reduced employment. Ovens-Murray -0.03 0.06 ■ Employment in upstream and producer sectors is Western District -0.07 -0.05 expected to decline in the March Quarter with the Wimmera -0.16 0.04 downstream sector remaining stable. Victoria -0.08 -0.08 -- Profi t On average, agribusinesses in Victoria reported less than 1.00 satisfactory profi tability in the December Quarter. 0.50 ■ Loddon statistical division was the only region to report better than satisfactory profi ts. 0.00 ■ Producers experienced poor profi tability in the December -0.50 Quarter. -1.00 ■ Downstream businesses reported profi ts to be better than satisfactory. Mallee Ovens- Murray East Loddon Barwon District Western Central Goulburn Wimmera Highlands Gippsland Gippsland Operating Costs Wimmera Wages Overall, agribusinesses in Victoria reported increased Western District operating costs in the December Quarter. Ovens-Murray Fuel ■ Wimmera was the only statistical division to report a Mallee Transport slight decline in operating costs. Loddon ■ Producers and downstream businesses experienced a Goulburn Government greater increase in costs than upstream businesses. Gippsland Charges Utility costs East Gippsland ■ Overall, the cost of inputs was the most commonly cited infl uence, followed by the cost of fuel. Central Highlands Inputs Barwon Other 0% 20% 40% 60% 80% 100% Victoria 23 PERFORMANCE INDICATORS Stock Levels Off -Farm Income Stock levels increased slightly in the agribusiness sector in Producers were asked what proportion of their total the December Quarter. income is generated on the farm. Almost half of all Victorian producers (48%) generate more than 75% of their income ■ Gippsland, Goulburn and Western District statistical from farm activities. divisions reported increased stock levels. ■ Producers in Barwon and Western District statistical ■ Downstream businesses reported the largest decline in divisions are more likely to generate off -farm income stock levels. than other regions. ■ On average stock levels are expected to decline in the ■ Farmers in the Wimmera and Loddon statistical divisions March Quarter. are most reliant on farm income. ■ The main reasons for changing stock levels were climatic conditions, including drought and frosts, and No Response changed production. Unsure December Qtr March Qtr Outlook 76-100% Barwon -0.16 -0.12 51-75% Central Highlands -0.25 -0.24 East Gippsland -0.03 -0.50 26-50% Gippsland 0.02 -0.03 0-25% Goulburn 0.71 0.39 0% 20% 40% 60% 80% 100% Loddon -0.06 -0.33 Mallee -0.12 -0.24 Weighted Percentage - Off Farm Income Ovens-Murray -0.13 0.03 Western District 0.01 -0.06 Wimmera -0.39 -0.22 Victoria 0.07 -0.05 Business Confi dence Drought Almost two-thirds of agribusinesses in Victoria (65%) felt Producers were asked if they believed conditions in 2006 to confi dent about business performance over the next 12 be worse than those in 2002. Forty-six percent of producers months. indicated that conditions in 2006 were the same or worse. ■ Mallee, Loddon and Wimmera regions reported the worst ■ On average, upstream and downstream businesses were conditions in 2006. slightly more positive about the future than producers. ■ Producers in Goulburn and Western District statistical ■ Goulburn statistical division was the most confi dent divisions were most likely to report better conditions in whereas the Mallee region was the least confi dent. 2006 than 2002. Wimmera Wimmera Western District Western District Ovens-Murray Ovens-Murray Mallee Mallee Loddon Loddon Goulburn Goulburn Gippsland Gippsland East Gippsland East Gippsland Central Highlands Central Highlands Barwon Barwon 0% 20% 40% 60% 80% 100% 0% 20% 40% 60% 80% 100% Weighted Percentage - Confi dent Weighted Percentage - Same or worse conditions The Western Research Institute (WRI) is an economic,
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