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NZ farmer confidence picks up in 2018; horticulturalists upbeat

Tuesday 27th March 2018

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New Zealand farmer confidence picked up in the first quarter of the year following two consecutive declines as farmers' fears about the policies of the Labour-led government stabilised.

Farmers expecting the rural economy to improve lifted to a net 15 percent from a net 13 percent in the the previous Rabobank Rural Confidence Survey. Those that see it improving fell to 27 percent from 29 percent while those seeing poorer times ahead dropped to 12 percent from 16 percent.

The survey shows farmer sentiment has stabilised after concerns about government intervention and policies had driven confidence significantly lower in the previous two quarters. The latest results showed worries about government policies and intervention – while still a concern – were now weighing less on the minds of the nation’s farmers, Rabobank said.

"Of the farmers who are expecting the agricultural economy to worsen this survey, government policy and intervention was nominated as a reason by 42 percent, compared with 80 percent in the previous quarter,” Rabobank New Zealand general manager for country banking Hayley Gourley said in a statement.

Other factors causing concern were falling commodity prices, cited by 31 percent, and drought, cited by 11 percent.

For those New Zealand farmers with an optimistic view of the year ahead, commodity prices remained the primary driver of positive sentiment, although they were less upbeat than in the past.

“Among the 27 percent of farmers expecting the agricultural economy to improve, the survey found a notable decline in the percentage citing commodity prices as reason for their optimism, with this figure dropping to 42 percent from 66 percent previously,” Gourley said. “Instead, this survey found an increased percentage of farmers who were buoyed by market-focused factors – including ‘improved conditions in overseas markets/economies’, ‘increasing demand’ and ‘improved marketing of agri products’ – for their positive view on the year ahead.

“This highlights a cautious optimism among farmers about how the economies of New Zealand’s key trading partners are performing, and how our agricultural products are positioned to take advantage of expected increases in demand.” 

Horticulturalists recorded the largest lift in confidence in the quarter, with net confidence rising to 34 percent from 16 percent, fulled by positive developments in key horticultural commodities.

“Driven by increased demand from consumers, Zespri have recently proposed additional kiwifruit licenses and this is supporting confidence among growers in this sector," Gourley said. "We’ve also seen increasing demand in both domestic and export markets for avocado, while in the pip fruit industry the harvest is underway and is looking good."

In contrast, net confidence among dairy farmers has fallen to 11 percent from 18 percent, marking the lowest level in the sector since mid-2016. Net confidence among sheep and beef farmers remained steady at 11 percent.

“While commodity pricing remains strong for dairy, beef and sheep meat products, the comparatively lower confidence among dairy and sheep and beef farmers suggests that these groups have greater concerns than horticulturalists over how macro-economic factors such as government legislation and the trade outlook will impact the overall agricultural economy," Gourley said.

Farmers across all sectors were more bullish about expectations for the performance of their own businesses in the coming 12 months, with 41 percent expecting their business performance to improve, up from 37 percent previously, and only 5 percent expecting performance to worsen, down from 9 percent.

Horticulturalists were again the most optimistic about their own business performance, with a net reading of 46 percent, up from 31 percent. Sheep and beef farmer optimism lifted to a net 37 percent from 28 percent, while dairy farmer optimism advanced to a net 33 percent from 30 percent.

Just 5 percent of farmers expected their own farm business performance to worsen in the coming year, matching the lowest level of individual business pessimism recorded since the survey began in 2003..

“This record low level of pessimism about their own business outlook is a reflection of the sustained strong performance of commodity prices across almost all sectors and the relatively stable operational costs which continue to support on-farm profitability and strengthen the long-term viability of farming business across New Zealand,” Gourley said.

Farmers’ investment intentions rebounded this quarter after dropping in the previous two surveys, with 29 percent now expecting to invest more in stock, plant and land in the coming 12 months, up from 26 percent, and only 5 percent planning to invest less, down from 8 percent. Horticulturalists had the strongest investment intentions of all farmers, with dairy farmers holding the weakest.

The survey was run by TNS which polled about 450 farmers. 


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