19 September 2007

4 minute read

Oceania

• Farmer confidence has improved for the third consecutive survey
• 50 per cent of farmers now expect economic conditions to improve.
• The biggest improvements in confidence have occurred in the beef and sheep sectors.
• Dairy confidence remains robust .
  

New Zealand farmer confidence has continued to improve, with a notable upturn in confidence levels among the country’s sheep and beef producers.

According to the results of the latest Rabobank/Nielsen Rural Confidence Survey, taken in August, half of New Zealand’s farmers now expect the economy to improve in the next 12 months. This is up 10 per cent from the 40 per cent who held that expectation in the previous survey, taken in June.

And the number of farmers expecting economic conditions to decline lowered to 19 per cent (from 26 per cent previously).

It is the third consecutive Rabobank/Nielsen Rural Confidence Survey to register improvements in farmer sentiment.

Dairy farmers continue to display robust confidence levels, according to the survey, but the biggest increases in confidence occurred among New Zealand’s beef and sheep farmers.

Sheep farmer confidence levels increased 12 per cent, with 33 per cent of sheep producers now expecting economic conditions to improve, while beef farmer confidence increased 17 per cent with 39 per cent expecting improved conditions.

“Importantly, optimistic beef and sheep farmers now out-number those who are pessimistic for the first time since October 2006,” according to Rabobank general manager Rural New Zealand Ben Russell.

A total of 77 per cent of the nation’s dairy producers expect an improved economy, compared to 78 per cent of dairy farmers with that expectation in the previous survey. However, Mr Russell said, the survey was undertaken before the latest Fonterra announcement which saw the projected payout for 2007/08 lifted to NZD6.40/kg milk solids.

Mr Russell said recent sharp falls in the New Zealand dollar and continued strong outlook for animal proteins generally, particularly dairy products, were underpinning a more buoyant outlook for New Zealand farmers.

Sheep and beef farmers were also historically at their most optimistic in the August and October surveys each year.

“Sheep industry confidence has been supported by the sharp decline in the New Zealand dollar, which has particularly affected export returns, and the welcome, if overdue, seasonal lift in lamb prices, which kicked in during August,” he said.

Rabobank recently expressed strong confidence in the medium to long-term outlook for New Zealand lamb and beef at a series of farmer seminars along the East Coast and in Otago/Southland. The seminars advised that most of the factors dragging down lamb prices in particular were cyclical in nature (for example the New Zealand dollar and record Australian lamb production due to de-stocking because of the drought), and that economic conditions would eventually turn in the industry’s favour.

The latest Rabobank/Nielsen Rural Confidence Survey found New Zealand farmers’ income expectations also improved, with 51 per cent expecting to receive higher incomes in the next 12 months, compared to 46 per cent in the previous survey. Of the sectors, dairy farmers continued to be the most optimistic about income, with 90 per cent expecting gross farm incomes to increase (albeit down slightly from 92 per cent in the previous survey).

Sheep and beef farmers have lifted their income outlook further. A total of 28 per cent of sheep farmers expected higher incomes, compared to 21 per cent in the previous survey, and there was a continued reduction in the number expecting their incomes to go down – 37 per cent compared to 45 per cent last survey. Beef farmers also have improved expectations with 38 per cent expecting higher gross farm incomes, up from 24 per cent previously.

Mr Russell said most farmers were indicating they would maintain the same level of investment in their farm businesses.

“The intention to decrease farm investment was most noticeable among sheep farmers,” he said. A total of 19 per cent of sheep farmers reported that they intended to invest less in the next 12 months.

“The survey also showed that 20 per cent of Hawkes Bay/Wairarapa farmers and 25 per cent of Otago/Southland farmers were planning to decrease investment. This is likely to reflect the poor climatic conditions in the region on the East Coast over the past six months, and the consecutive years of poor sheep industry returns," Mr Russell said.

Interest rates appeared to be less of a concern for farmers this survey, with 45 per cent expecting rates to increase, down from 78 per cent who had that view back in June.

The bi-monthly Rabobank/Nielsen Rural Confidence Survey is the only study of its type in New Zealand. A panel of approximately 740 farmers across New Zealand was surveyed in the last survey period.

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