Farmers struggling to find green shoots

New Zealand may be entering a prolonged recession, says Federated Farmers.

The farm lobby said its confidence survey has shown farmers remain deeply pessimistic about the state of the general economy and their own prospects.

The view is bleaker than that of the Ministry of Agriculture and Forestry (MAF), which yesterday predicted steady increases in returns for meat and forestry products over the years to 2013.

Federated Farmers president Don Nicolson said of its survey: "The results make for ugly reading and illustrate that the recession's full bite is yet to come. The gloom in the rural economy means farm chequebooks are closing.

"A net 45 per cent of farmers believe the economy will deteriorate."

While Reserve Bank Governor Alan Bollard seemed set to keep interest rates on hold, the low confidence levels of farmers and low dairy payouts for the foreseeable future raised the spectre of an "L-shaped" recession where the economy will bump along the bottom for a number of quarters.

"Farmers are finding it hard to uncover evidence of the much touted 'green shoots' and simply do not believe the economy will emerge from recession any time soon," Nicolson said. Dairy farmers were particularly unhappy, with a net 53 per cent expecting deterioration, but even in the most optimistic sheep and beef sector, a net 40 per cent of farmers expected worse to come.

Nicolson claimed that city-dwellers had not yet felt the full effect of the recession's impact on the rural economy.

However, MAF economists said that while they expected the average payout to dairy farmers to fall again next season, it would pick up in 2011.

"Payout and overall export value of dairy are both expected to increase after a lean 2010, but are not expected to return to 2008 levels in the foreseeable future," the economists said yesterday.

Long-range economic forecasts showed averaged payouts picking up from a forecast of $4.55 per kg of milksolids for the 2009-10 season to $5.27 in 2011, $5.78 in 2012, and $5.96 in 2013. Farmers got $7.64 last year.

MAF director general Murray Sherwin said the Situation and Outlook for NZ Agriculture and Forestry released yesterday forecast steady increases in returns for meat and forestry products over the years to 2013.

While the forecasts showed a "downgrade" for the year ahead "it is by no means all doom and gloom", said Sherwin.

"People will always need feeding, so with the global population continuing to grow, demand for food products will also increase."

- NZPA