Farm Outlook Remains Stable - Rabobank

19 April 2001

Farm confidence has plateaued this autumn, following economic slowdown in New Zealand’s main export markets and the domestic economy.

But almost all farmers expect the primary sector to continue performing at its current relatively high levels, or better.

They’ll spend the same or more on their businesses, and over half still expect to earn more money in the next 12 months.

That’s according to the latest AC Nielsen/Rabobank Rural Confidence Survey.

Taken before Britain’s foot and mouth epidemic, and the New Zealand government’s go-ahead for Global Dairy Co’s proposed mega-merger, the new survey shows rural confidence has again eased, particularly among sheep farmers.

But, says Rabobank managing director, Bryan Inch, all signs continue to point to an overall picture of stability after a year in which product prices in most farm categories have risen to the highest levels for some time.

“Once again, we’re seeing more farmers predict no change this year in critical factors like agricultural performance, farm spending and gross farm income.

“Last February, for example, the first survey found 60 percent of all farmers expected farm performance to improve in the next 12 months.

“Now, exactly the same number predict industry performance will remain at current levels. Meanwhile the number who believe things will actually worsen has yet to reach 10 percent – this time last year that figure was three percent, now it’s eight percent, the same as in the last survey.”

Farm optimism has dropped by 10 percent in the new survey, down from 42 percent in the last survey, conducted in January 2001.

Sixty percent of farmers now predict no change, up from 50 percent in January, 44 percent in November and 36 percent in February 2000.

“What we’re starting to see is the current severe drought impacting on the confidence of sheep and beef farmers, especially in the lower North Island and east coast of the South Island. And uncertainty in the dairy sector over the future structure of the industry is impacting on confidence there” says Bryan Inch.

Optimism has eased most sharply on sheep farms – 26 percent expect better performance (compared to 42 percent in the previous survey), while 66 percent predict no change (49 percent).

Dairy farm confidence has eased again from 54 percent to 43 percent but those producers are still the among most optimistic, and again, the drop has favoured no change rather than worsening performance. “It will be interesting to follow the reaction of dairy farmers in the coming months, especially since the government has now approved the mega-merger proposal. This will be an excellent measure of how they feel about Global Dairy Co and the direction the industry is heading” Bryan Inch said.

Farm investment outlook for across all sectors continues to track consistently.

“These figures remain remarkably stable,” Bryan Inch says: Thirty-nine percent of all farmers say they will spend more, 53 percent will spend the same and seven percent will spend less. These figures are virtually unchanged from the February phase.

The overwhelming majority of farmers surveyed expect to earn as least as much this year as they did last year, if not more, and that’s also good news, Bryan Inch says.

“Nearly 90 percent of farmers expect either no change, or higher returns.

Almost three quarters of dairy farmers still expect to earn more this year, as do 55 percent of sheep farmers, he says.

The general outlook for farm input prices shows little change – 89 percent of respondents expect inputs to cost more this year while 10 percent expect prices to stay constant.

And Bryan Inch says once again there’s been a big swing in the interest rate outlook – only 19 percent of all farmers now expect rates to rise, while 61 percent predict no change and 18 percent say they will drop. Twelve months ago 94% of farmers expected interest rates to rise during the following twelve months.

The AC Nielsen/Rabobank Rural Confidence Indicator is the first survey of its type in New Zealand, and uses AC Nielsen’s 1000-strong panel of farmers across the country.

Next results will be released in June.

ENDS

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