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Interest Rates And Dollar Dent Farmer Confidence

Interest Rates And Dollar Dent Farmer Confidence

The rising New Zealand dollar, climate and the expectation of increased interest rates continue to impact on farmer confidence. But more than 80 per cent plan to spend the same or more on their business in the coming year. These are the key findings of the latest ACNielsen/Rabobank Rural Confidence Survey, says Rabobank general manager Doug Crombie.

Taken in December/January, the survey results are reflective of the vulnerability of farm returns to external factors.

Over half of all farmers surveyed expect their income levels to decrease in the coming 12 months. This is up from 36 per cent in the previous survey, but is at the same level as the same time last year.

“With international prices for New Zealand produce remaining at a high level, the benefits are not being realised by farmers because of the rising currency”, Doug Crombie said. “This income expectation is completely realistic, and it is pleasing to see that most farmers are aware of this possibility and puts them in a position to make changes if necessary.”

There is a significant increase in the number of farmers expecting interest rates to rise in the next year. Recent announcements from the Reserve Bank have over three quarters of farmers braced for higher interest rates.

“The rising dollar has led to lower income expectations and, combined with the expectation of rising interest rates, impacts on the overall outlook,” Mr Crombie said. “Additionally the dry summer in parts of the South Island has also resulted in a lower confidence.”

The survey was conducted before the recent floods in the lower North Island.

While income expectations are down, the key investment intention indicator remains high, with over 80 per cent of farmers planning to increase or maintain current investment levels.

The survey shows farmers are also expecting to pay less for farm inputs. Nearly two thirds expect farm input costs to decrease or stay the same.

“With lower incomes it is important that farmers don’t lose sight of the need to maintain productive inputs,” Mr Crombie said. “A lot of money has been reinvested back into farms over the last couple of years, and production gains will be one way to help offset negative impacts of a rising dollar or falling product prices”.

The ACNielsen/Rabobank Rural Confidence Survey is the first survey of its type in New Zealand, and uses ACNielsen’s 1000-strong panel of farmers across the country. The next results will be released in April 2004.

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