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Rural Sector Remains Positive

Rural Sector Remains Positive

The impact of the continuing rise in the New Zealand dollar appears not to have impacted on farmer confidence at the start of 2003. An increasing number of farmers are predicting an improved outlook in the next 12 months and most are expecting interest rates to stay at their current levels.

These are the key results of the latest bi-monthly AC Nielsen/ Rabobank Rural Confidence Survey, says Rabobank managing director Bryan Inch.

Undertaken in December 2002 and January 2003, this was the third consecutive survey recording an increase in confidence levels, after a prolonged period of pessimism.

All farming sectors showed an increase or maintained similar levels in confidence from the last survey, undertaken two months previously. Two thirds of all farmers now expect the rural economy to perform at or above current levels for the next twelve months.

The improvement is greatest among dairy farmers, with 80 per cent expecting their situation to stay at current levels or to improve.

Mr Inch said the impact of Fonterra’s recent payout announcement had not been recorded in the survey, which was undertaken before the announcement was made.

Despite rising world dairy prices and Fonterra’s foreign exchange cover, the strengthening New Zealand dollar has still had a negative impact on Fonterra’s projected payout.

“Although dairy farmers are disappointed with the decrease in their forecast payout for this season, the fundamentals of the industry on a global scale are sound and we see this as being a short term hurdle that Fonterra is well placed to overcome” he said. “Even so, we do expect to see dairy farmer disappointment reflected in their confidence levels in future surveys”.

Another key factor in the improving levels of farmer confidence is the low interest rate environment. Over 70 per cent of farmers expect interest rates to stay at similar levels or to decrease further.

“With interest rates at current levels, borrowers have much more confidence when planning and assessing their investment options” Mr Inch said.

The next results will be released in April 2003.

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