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Pessimism Or Realism On The Farm?

13 August 2002

Pessimism Or Realism On The Farm?

Falling world commodity prices and exchange rate uncertainty continue to erode farmer confidence.

In what is the lowest outlook for over two years, just over one percent of farmers expect the agricultural economy to improve in the coming twelve months.

They’re also increasingly braced for higher interest rates and rising input costs.

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

Taken in June/July, the survey shows farmers are not expecting the recent good times to continue, says Rabobank managing director, Bryan Inch.

“What we are seeing here is that farmers are realistic about what they can expect from their business. The last two years have been exceptional and we have seen returns, in the dairy sector especially, that have been at historical highs.”

While dairy farmers are expecting the largest impact on incomes, all farming sectors are braced for reduced incomes in the next twelve months.

“We have to remember that, longer term, things are still looking positive for most rural sectors,” says Bryan Inch. “New Zealand farmers operate in a cyclical and global market. We are exposed to the vagaries of these cycles, and there is still strong demand for New Zealand meat, dairy and horticultural produce.”

As incomes decrease farmers are reigning in their investment expectations in stock, plant and land. Nearly one third of farmers plan to reduce investment in the coming year, down from six percent at the same time last year.

“With falling commodity prices, it is important that farmers maintain production levels and don’t cut back on productive inputs at this time,” says Bryan Inch.

Rabobank remains positive about the rural sector.

“We have a positive long-term outlook and view the current environment as part of the cyclical nature of farming and banking the rural sector,” says Bryan Inch.

“So, the results of the survey indicate farmers are realistic about the year ahead.”

The next round of AC Nielsen/Rabobank Rural Confidence Survey results will be released in October.

ENDS

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