NZ farmers least pessimistic in 2 years

Wednesday 27th July 2016

New Zealand farmer confidence improved to a two-year high heading into the new season, though sentiment remains negative.

A net 11.6 percent of farmers expect general economic conditions to worsen over the next 12 months, according to the latest new season Federated Farmers' Farm Confidence July survey. That's an improvement from a net 28.6 percent who were pessimistic in the previous mid-season survey in January, and the best reading since July 2014.

While the country's farmers were less pessimistic, sentiment about the economy remained negative across all industry groups covered by the survey. Arable farmers showed the most improvement since January, with a net 11.4 percent pessimistic compared with 36.3 percent in January, while pessimism among meat and fibre farmers reduced to a net 16.4 percent from 34.7 percent and dairy farmer pessimism was at a net 6.8 percent from 24.4 percent.

The only group to record increased pessimism was the 'other farmers' category, where the measure worsened to a net 36.1 percent from 20.4 percent. The group includes farmers of bees, goats, high country and rural butchers and Federated Farmers said the relatively small number of respondents could cause volatility.

"The good news is that farmer confidence in the general economy has picked up since the January survey," Federated Farmers said. "However, the not so good news is that pessimists continue to outweigh optimists, as they have for the past two years. Furthermore most of the improvement in the net score was due to an increase in those thinking economic conditions would stay the same rather than any significant increase in those expecting them to improve."

The survey showed 12.3 percent of farmers expected the general economy to improve, 61.7 percent expected it to stay the same, 23.9 percent expected it to worsen and 2.2 percent said they didn't know.

The farmer lobby group said the survey came after Britain's vote to leave the European Union, sparking a period of global economic volatility. It also came at a time of heightened concern about the impact of the booming housing market on New Zealand's financial system and the wider economy.

"These factors weighed heavily on farmers' minds," it said.

All regions remained pessimistic with Taranaki-Manawatu the most upbeat with a net 3.4 percent pessimistic, and West Coast-Tasman-Marlborough was the most gloomy with a net 23.4 percent pessimistic.

Farmer confidence in the outlook for their own fortunes improved, with a net 8.2 expecting their own farm profitability to deteriorate over the next 12 months, compared with a net 43.5 percent in January.

Still, Federated Farmers said the improvement reflected a low starting point as the last couple of years had been "extremely challenging" for farmers.

Some 43 percent of farmers said their business was losing money, while 29 percent were breaking even and just 27 percent were profitable.

While commodity prices were expected to lift over the 2016/17 season, concerns about the global economy remain and farmers are "understandably cautious", Federated Farmers said.

The survey showed a net 16.3 percent of farmers expect to increase debt, an improvement from the net 22.5 percent who expected to increase debt in January.

"This improvement reflects the improvement in profitability expectations," Federated Farmers said. "It probably also reflects a recognition that banks will be looking for farmers to start paying back debt if market conditions and profitability improve."

Meanwhile, farmers' spending intentions remained relatively unchanged, with a net 26.5 percent expecting to reduce spending over the coming year, compared with a net 27.1 percent in January.

The web-based survey was held between July 1 and July 11 and attracted 819 individual responses.

BusinessDesk.co.nz

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