Commodities fuel farmer confidence

Photo / Bay of Plenty Times

New Zealand's agricultural sector is reporting an increasingly rosy view of the future, with 87 per cent of the nation's farmers expecting economic conditions to either improve or remain stable.

It is the fourth consecutive quarter that there has been a jump in farmer confidence, Rabobank says in its latest rural confidence survey.

The survey, conducted last month, found 41 per cent of farmers expect the agricultural economy to improve in the next year, climbing from 34 per cent in the previous survey.

The number expecting conditions to decline has stayed the same at 11 per cent, with the remainder anticipating a stable economic environment.

Rabobank New Zealand's general manager Ben Russell said confidence had improved across all sectors, but was particularly high in dairy, with 54 per cent of dairy producers expressing an optimistic outlook.

This was up from 41 per cent in the previous quarter.

Rising commodity prices and improved overseas markets/economies were the main drivers of New Zealand farmers' improved outlook generally.

Russell said high dairy farmer confidence had been fuelled by Fonterra's opening payout announcement with the milk price forecast eight per cent higher than the previous season.

Even results of the July auction of dairy commodities on the globalDairyTrade platform - which was prior to the survey and saw prices fall 14 per cent - did not appear to dent dairy farmer confidence, he said.

However the latest globalDairyTrade results, which saw prices fall another 8.3 per cent, were not included in the survey, Russell said.

Improvement in sheep and beef farmer confidence was less pronounced, with 34 per cent expecting the agricultural economy to improve, up from 32 per cent in the previous survey.

Farm gate beef prices are above the previous season, while lamb and venison prices are lower as strong offshore pricing for these products has been offset by unfavourable currency movements, Russell said.

Of those farmers surveyed who expected conditions to worsen, 32 per cent cited government intervention and policies as a reason.

This is higher than the last survey (12 per cent) and was likely to be the result of the the Emissions Trading Scheme, which was introduced on July 1, Russell said.

Farmers expectations about their own performance showed more diverse results.

A total 70 per cent of dairy farmers expect an improvement in their own businesses, but only 26 per cent of sheep and beef farmers and 36 per cent of horticulturalists expect their performance to improve.

The survey also showed investment intentions have strengthened.

A total 28 per cent of those surveyed expected to increase their farm business investment and 60 per cent plan to maintain investment levels.

Only 17 per cent expect land values to fall.

Sheep and beef farmers were the least optimistic about land prices, while nearly a third of dairy farmers were expecting the price of land to rise in the next year.

- NZ HERALD