Rural Optimism Lowest In Two Years

For immediate release.

Rural Optimism Lowest In Two Years

FARM confidence has fallen dramatically in the nervous wake of global events, and the prolonged drought conditions experienced across central and southern New Zealand.

Barely a quarter of New Zealand farmers now expect their industry to perform better in the coming 12 months, and nearly one in five expects to earn less.

They’re also increasingly braced for higher interest rates, although their spending plans show little change.

These are key findings of the latest AC Nielsen/Rabobank Rural Confidence Survey.

Taken in September, the survey shows increasing polarisation across most rural sectors, says Rabobank managing director Bryan Inch.

“The number of farmers who expect industry performance to worsen is now 13 per cent. That’s the highest we’ve seen since starting the survey two years ago, and those who say things will get better is 24 per cent, the lowest yet recorded.

“In key business indicators like industry performance, total investment, gross farm income and interest rates, the core of farmers who predict no change remains constant.

“The swings in outlook have instead been directly from positive to negative. This is understandable considering the uncertainty around potential trade and economic implications of what has been happening around the world recently, coupled with continued difficult climatic conditions at home – although the recent rain may go some way to brighten the outlook.”

Dairy farmers though remain upbeat and one third expect things to improve in the coming year, and showing little change from the previous survey results. “With the new season under way and the new industry structure nearly finalised, dairy farmers can see the potential that Fonterra will be able to deliver them” says Bryan Inch.

But sheep, beef and mixed farmers are more pessimistic. Twenty per cent of beef farmers now expect worse to come (8 per cent in the previous survey taken two months ago), as do 18 per cent of mixed farmers (6 per cent) and 14 per cent of sheep farmers (4 per cent).

Bryan Inch says the same swing is reflected in the outlook for investment in stock, plant and land over the next 12 month.

“The number of farmers who plan to cut spending is now eight percent, the highest since the survey started, while only 34 per cent plan to spend more.”

Dairy farmers again are among the most confident – 41 per cent will spend more (42 per cent), compared with 35 per cent of beef farmers (34 per cent) and 28 per cent of mixed farmers (32 per cent).

Sheep farmers show the biggest swing – 13 per cent say they will cut spending (7 per cent) while 28 per cent will spend more (37 per cent).

Bryan Inch says for the first time since the survey began, under half of New Zealand farmers - 46 per cent - expect to earn more this year, while nearly a fifth (19 per cent) predict lower incomes.

Dairy farmers, however, have moved against this trend – 59 per cent say they’ll earn more (55 per cent), compared with sheep (32 per cent, back nine per cent), beef (38 per cent, back six per cent) and mixed (45 per cent, back 15 per cent).

Almost a third of sheep farmers and a fifth of beef farmers are braced for lower earnings, Bryan Inch adds.

Virtually all farmers still expect to pay more or the same for farm inputs in the coming year – this indicator is the only one in the survey to show little change, Inch says.

Interest rate expectations, however, have swung again – 31 per cent of all farmers predict higher rates (18 per cent), while only six percent expect to pay less (18 per cent).

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 December.

ENDS

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