Fourth quarterly rise for NZ farmer confidence

Media Release August 11, 20101

Fourth quarterly rise for NZ farmer confidence

New Zealand’s agricultural sector is reporting an increasingly rosy view of the future,

with 87 per cent of the nation’s farmers expecting economic conditions to either improve or remain stable. The results of the latest Rabobank Rural Confidence Survey,

released today, show the fourth consecutive quarterly lift in farmer confidence.

Taken across New Zealand last month, the survey found 41 per cent of farmers expected the agricultural economy to improve over the next 12 months, climbing from 34 per cent in the previous survey. The number expecting conditions to decline had stayed the same at 11 per cent, with the remainder anticipating a stable economic environment.

Rabobank general manager New Zealand Ben Russell said confidence had improved across all sectors, but was particularly high in dairy, with 54 per cent of dairy producers expressing an optimistic outlook (up from 41 per cent the previous quarter).

Rising commodity prices and improved overseas markets/economies were the main drivers of New Zealand farmers’ improved outlook generally.

Mr Russell said the high dairy farmer confidence would have been fuelled by Fonterra’s opening payout announcement with the milk price forecast eight per cent higher than the previous season. Even results of the July auction of dairy commodities on the globalDairyTrade platform – which was prior to the survey and saw prices fall 14 per cent – did not appear to dent dairy farmer confidence.

“However last week’s August globalDairyTrade results, which have seen prices fall another 8.3 per cent, would not have been taken into account in the survey,” Mr Russell cautioned.

The improvement in sheep and beef farmer confidence was less pronounced, with 34 per cent expecting the agricultural economy to improve, up from 32 per cent in the previous survey.

Results at a Glance Farmer confidence has increased for the fourth consecutive quarter.

Sentiment has improved across all sectors, although is particularly high in dairy. Rising commodity prices and improved overseas markets/economies are the main drivers of confidence, although the survey was taken just prior to the most recent fall in global dairy prices.

Farmers’ investment intentions have strengthened with more farmers expecting to increase their level of investment.

“Sheep and beef farmers have retained a similar level of confidence with farmgate prices generally holding at reasonable levels, although prospects are providing a mixed outlook. Farm gate beef prices are currently above the previous season, while lamb and venison prices are lower as strong offshore pricing for these products has been offset by unfavourable currency movements,” Mr Russell said.

Of those farmers surveyed who expected conditions to worsen, 32 per cent cited government intervention and policies as a reason. This compared to only 12 per cent who had these concerns last survey.

“This is likely to be related to the introduction of the Emissions Trading Scheme on July 1 and the associated publicity surrounding it,” Mr Russell said.

In relation to farmers’ expectations about the performance of their own individual operations, the Rabobank survey showed more diverse results. A total of 70 per cent of dairy farmers expected an improvement in their own businesses (up from 51 per cent), although only 26 per cent of sheep and beef farmers were expecting their business performance to improve (down from 28 per cent). Of horticulturalists, 36 per cent expected their businesses to improve (up from 20 per cent last survey).

The latest Rabobank Rural Confidence Survey showed that investment intentions among New Zealand farmers had strengthened, with 28 per cent now expecting to increase their farm business investment, up from 25 per cent previously. A further 60 per cent intended to maintain investment levels.

Farmers also had an increasingly bullish outlook on land values.

The survey showed the number of farmers expecting land prices to go up over the next 12 months had increased to 23 per cent (from 16 per cent), while an increased number also expected prices to hold their value – 58 per cent (up from 56 per cent). Only 17 per cent expected land values to fall, down from 26 per cent with that view last survey.

Mr Russell said sheep and beef farmers were the least optimistic about land prices, while nearly a third of dairy farmers were expecting the price of land to rise over the coming year. Conducted since 2003, the Rabobank Rural Confidence Survey is the only study of its type in New Zealand. The survey is administered by independent research agency TNS Conversa, interviewing a panel of approximately 450 farmers each quarter.

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