Rural Confidence Falls

Rural Confidence Falls

Expectations of higher interest rates and decreasing farm incomes have seen farmer confidence decline to its lowest level in 18 months, according to the latest bi-monthly ACNielsen/ Rabobank Rural Confidence Survey.

Few farmers now predict an improvement in the rural sector in the next 12 months, while 70 per cent believe their gross income will drop. And over 80 per cent are bracing themselves for a rise in interest rates.

Rabobank general manager Doug Crombie says, after a period of rising confidence in 2003, farmers are now more pessimistic about the industry, with less than three per cent expecting an improvement in outlook in the coming year.
Taken in February-March, the survey showed farmer sentiment is approaching the lowest levels seen in the past four years.
Mr Crombie says the level of pessimism among farmers is somewhat surprising.

“The international market for produce remains strong. Looking ahead the dollar has been falling and Fonterra has confirmed the payout for 2003/2004. I expect to see a lift in confidence in the next survey,” he said.
Less than 10 per cent of farmers expect their income levels to rise and an increasing number are prepared for rising input costs.

Mr Crombie says the high dollar has helped lower income expectations, while interest rate expectations are also up.

“Combined with an expectation of rising input costs, this means we are seeing a number of factors impacting on the overall outlook,” he said.
The survey showed there has also been a decrease in the key indicator of investment intentions. Almost a quarter of farmers plan to cut back on their investment in stock, plant and land in the coming year.

Mr Crombie warned that farmers should not over-react to current industry challenges and reduce their productivity levels.

“Farmers will be cautious with spending in the coming season due to reduced income expectations and rising farm input costs,” he said.

“However, with incomes decreasing, it is essential that productive inputs and maintenance levels are maintained as production gains will be one way to help offset any 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 June 2004.

ENDS

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