Farmer confidence rises as value of dollar declines

Farmer confidence levels are at their highest in 2-1/2 years, with sheep farmers more confident about their businesses than at any time since February 2000, a bank survey shows.

Blizzards and other severe winter weather during July in South Canterbury and Otago did not affect farmer confidence levels, economists at Rabobank said today.

Farmers are viewing the 12-month outlook for the New Zealand economy differently from city-based business people, said Rabobank's rural general manager, Ben Russell .

"Where business confidence is at low levels, farmers are the most optimistic about the rural economy since October 2004," he said .

"Optimism in New Zealand's rural economy appears to have a converse relationship with movements in the NZ/US dollar exchange rate, with confidence being more positive when the NZ dollar is weaker," Mr Russell said.

The latest rural confidence survey, conducted jointly by Rabobank and AC Nielsen during the first two weeks in August, clearly showed a positive response to the lower exchange rate and continued strong commodity prices.

The Rural Confidence Survey was "definitely bucking the pessimistic trend of business confidence in the economy as a whole," Mr Russell said.

"Where business confidence surveys are hitting 18-month lows, the rural confidence survey has reached a two-year high," he said.

The primary driver was the lower exchange rate for the NZ dollar against the currencies of key trading partners.

"Farmers are well aware of the impact exchange rates have on the income side of their businesses," he said.

The August survey showed 32 per cent of farmers were expecting an improvement in the economy and 56 per cent though it would remain the same.

"This is a significant turnaround from the first survey of 2006, taken in February, when only 3 per cent of farmers thought the economy would improve and 23 per cent believed it would stay the same," Mr Russell said. At that time the NZ dollar was worth over US70c - today it is closer to US64c.

- NZPA