Rural Sector Remains Cautious

11 April 2002

Although New Zealand farmers are forecasting lower incomes and weaker farm sector performance in the year ahead, they still plan to maintain or increase current levels of investment in stock, plant and land.

Few farmers now predict a better year ahead for agriculture, while the number who believe their gross income will drop has reached 33 per cent, the highest recorded in the past two years. At the same time though, 87 per cent plan to maintain or increase their current levels of investment.

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

“A third of all farmers now expect to earn less, which is up from 25 per cent in February. This swing is clearly dominated by dairy farmers. Nearly half predict incomes will drop this year, compared with 30 per cent last survey.”

This reflects dairying’s major influence on our farm economy and follows months of export price warnings not only for milk products but other primary produce as well, Bryan Inch says.

“Most farmers have clearly taken these cautions on board, and are planning realistically and sensibly for the coming 12 months after what we must remember has been a lengthy period of record farm product prices virtually across the board.

We’ve seen a big swing overall from no change to less income,” says Bryan Inch. “Thirty-six per cent of all farmers now expect to earn the same, which is down from 59 per cent, while 33 per cent expect to earn less, up from 11 per cent.”

In addition to dairy farmers predicting an income reduction next year, beef farmers have also reined in their expectations – 49 per cent predict no change (38 per cent), while the number of those who expect to earn more has dropped from 28 per cent to 19 per cent.

Thirty-seven per cent of sheep farmers expect to earn more (41 per cent), and 41 per cent to earn the same (36 per cent).

Despite not expecting significant income gains next year, the overall farm investment outlook remains strong. One farmer in three says they will invest more, 57 per cent plan no change and 13 per cent will spend less.

Dairy investment will ease - 19 per cent of dairy farmers now say they will cut investment (compared with 11 per cent), 54 per cent will maintain their current levels (62 per cent) and 28 per cent will spend more (27 per cent)

The number of beef farmers who say they will invest more has eased five per cent since last survey, to 25 per cent.

Sheep farmers are again relatively optimistic – 33 per cent will invest more (up from 30 per cent).

The outlook for farm input prices remains consistent with the February survey, Bryan Inch says. Seventy three per cent of all farmers expect to pay more, 26 per cent predict no change and 1 per cent predict prices will drop.

“Interest rate expectations have shifted again, however. About half the farmers questioned predicted no change in rates, but the number of those expecting rates to rise moved from 27 per cent last survey to 43 per cent, while those expecting lower rates fell from 19 per cent to six per cent.”

Next results of the survey will be released in June.

ENDS

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