New Zealand farmer confidence continues

New Zealand farmer confidence continues upward trend

New Zealand farmer confidence is continuing to trend upwards, with the latest Rabobank/Nielsen Rural Confidence Survey showing a further net improvement in confidence levels.

The survey, taken last month, showed that although there had been a slight decrease in the number of New Zealand farmers expecting the rural economy to improve (down from 50 per cent in the previous survey to 49 per cent), the number expecting conditions to worsen had almost halved (from 19 per cent to 10 per cent).

Rabobank general manager Rural New Zealand Ben Russell said the survey indicated many farmers who had previously had a pessimistic outlook had now moved to the view that conditions were likely to remain stable. The number of farmers expecting the rural economy to remain the same had increased from 31 per cent to 40 per cent.

“The increasing expectation of stability in the rural economy is likely to be a reflection of relatively strong international agricultural commodity markets largely off-setting the downward pressure on export returns as a result of the strong New Zealand dollar,” he said.

This is the fourth Rabobank/Nielsen Rabobank Rural Confidence Survey in a row to show overall improvement in farmer sentiment.

Mr Russell said the survey showed sheep and beef farmer confidence had continued on the upward trajectory begun earlier in the year. Forty per cent of sheep farmers now expect economic conditions to improve (up from 33 per cent previously), with only 11 per cent expecting a decline in the economy (down from 28 per cent with that expectation in the previous survey).

“Sheep farmers are likely to have been encouraged by the seasonal lift in farm gate prices over the past two months, while the New Zealand dollar has been relatively steady against the Euro, which remains the most important currency for lamb exports alongside the British pound,” he said.

“Processing companies have also been reporting positive international sentiment at the start of the chilled lamb selling season and following the major Anuga food trade fair in Germany in mid-October.”

Mr Russell said that while the number of beef farmers expecting the rural economy to improve had declined slightly (from 39 per cent to 37 per cent), the number expecting conditions to worsen had decreased significantly (from 25 per cent to 16 per cent).

“Beef farm gate price had been steady, but then dropped due to currency pressures and easing US beef prices. However, beef producers’ confidence levels are likely to have been sustained by the positive demand for meat protein globally,” he said.

“Overall, we believe beef and sheep farmers are cautiously optimistic that the worst of the trading conditions are behind them, but they remain to be convinced that prices are likely to markedly improve next season.”

Dairy farmers, on the other hand, were shown to be slightly less optimistic than in the previous survey. Although the majority of the nation’s dairy producers (a total of 67 per cent) were still anticipating improved economic conditions, this was down from 77 per cent with that view in the previous survey. The number expecting deteriorating conditions remained constant at just four per cent.

“It appears as though a significant number of dairy producers have gone from thinking conditions will improve to believing they will stay the same, with 28 per cent now falling into this category,” Mr Russell said.

“This may reflect the fact that dairy farmers think the current situation is as good as it gets, rather than any significant decline in sentiment.”

New Zealand farmers’ income expectations are also on the up. The latest survey showed that more than half of the country’s farmers (56 per cent) expect their gross incomes to increase in the coming 12 months, up from 51 per cent with that view last survey.

“Dairy and cropping farmers lead expectations here, with 93 per cent of dairy producers and 70 per cent of cropping farmers expecting higher incomes,” Mr Russell said.

“Dairy farmers are starting to receive the higher forecast payout as the milk production season and resulting cash flow is now well underway. International dairy commodity prices have also held at high levels providing increased certainty to the $6.40 per kg milk solids expected this season.

“Cropping farmers have seen a significant change in outlook in recent months. In February this year, only 36 per cent expected their incomes to increase. This improvement is likely to be the result of higher grain prices now being contracted in the local market, as imported grain costs have soared.”

Farmers’ investment intentions also strengthened, with 30 per cent of farmers expecting to increase the total level of investment in their farm business (up from 25 per cent). Only 10 per cent intend to invest less.

Mr Russell said the survey showed farmers were well aware that input prices were also likely to rise, with 90 per cent of farmers overall and 98 per cent of dairy farmers expecting higher costs.

Interest rates, however, appear to be less of a concern, with 61 per cent expecting interest rates to stay the same and 32 per cent expecting an increase. Mr Russell said it was likely that farmers were reacting to Reserve Bank indications of some stability of rates at current levels.

The bi-monthly Rabobank/Nielsen Rural Confidence Survey is the only study of its type in New Zealand. A panel of 787 farmers across New Zealand was surveyed in the last survey period.

Rabobank New Zealand is a part of the international Rabobank Group, the world's leading specialist in food and agribusiness banking. Rabobank has more than 100 years' experience providing customised banking and finance solutions to businesses involved in all aspects of food and agribusiness. Rabobank has a AAA credit rating and is ranked one of the world’s safest banks by Global Finance magazine. Rabobank operates in 42 countries, servicing the needs of more than nine million clients worldwide through a network of more than 1500 offices and branches. Rabobank New Zealand is one of the leading rural lenders and a significant provider of business and corporate banking and financial services to the New Zealand food and agribusiness sector. The bank has 29 branches throughout New Zealand.

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