KEY POINTS:
There has been a sharp fall in dairy farmers' confidence, according to the latest bi-monthly Rabobank/Nielsen Rural Confidence Survey.
Dairy farmer confidence recorded the sharpest fall in a survey which showed overall that 38 per cent of farmers expected the economy to worsen, up from 22 per cent in the last survey in December.
Only 15 per cent of dairy producers expected the economy to improve as against 59 per cent in the last survey and 31 per cent expected conditions to worsen, up from 6 per cent before.
Across the sector 15 per cent of farmers expected the economy to improve, a significant drop from 34 per cent who were upbeat before. The survey showed the first downturn in rural confidence levels in 12 months.
"Key drivers of the decline in confidence were prolonged drought afflicting many parts of the country and the strengthening exchange rate," Rabobank's rural general manager Ben Russell said.
Payout expectations remain firm but the easing in world dairy commodity prices, coupled with the drought and the high exchange rate, would hurt sentiment.
"International dairy commodity prices have declined by around 3 per cent since the end of 2007, although drops have been sharper for skim milk powder," he said. In New Zealand dollar terms the reduction has been greater, at close to 10 per cent, he added.
Beef farmer confidence fell significantly, with 45 per cent expecting the rural economy to worsen compared to 29 per cent in the last survey. Only 9 per cent expect conditions to improve, down from 20 per cent before.
"The drop in beef farmer confidence is likely to be closely linked to weather conditions, which have been extremely dry in many key beef-growing regions, particularly in the North Island," Russell said.
February is traditionally a low point for sheep and beef farmer confidence as farm gate prices are lowest during the peak part of the processing season when stock throughput is plentiful.
Overall, farmers' investment intentions were down, with one fifth of the country's farmers expecting to reduce their on-farm investment over the next 12 months, although 60 per cent of farmers intend to hold their current investment levels.
The survey also showed farmers are not expecting a reprieve from the current high interest rates with 45 per cent expecting a further increase in interest rates in the coming 12 months.
Only 5 per cent expect rates to ease.
RURAL PROPERTY BOOM WINDS DOWN
Dairy sector real estate values eased across all farm categories in February, despite high transaction volumes.
The median price for a dairy farm in the three months to February eased to $4.14 million, from the January record of $4.25 million, Real Estate Institute New Zealand spokesman Peter McDonald said.
In the three months to February, 158 farms were sold compared to 156 in the three months to January.
An analysis of 22 dairy farm transactions showed an average price per hectare of $44,165, up from $37,000 in January.
"The heat continues in the dairy sector with very strong demand and some impressive prices," he said.
The national farm median price was down a little at $1.75 million from $1.79 million in January. Some 713 farms changed hands in the three months to February, down from 732 in the three months to January but up from 504 in the same period last year.
- NZPA
