Saturday, December 2, 2023

Confidence inches up from deep gloom

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Farmer sentiment has improved two quarters in a row in Rabobank’s Rural Confidence survey.
The year is 1996, and Steve Wyn-Harris and a farming mate compare notes on sheep and beef and diary farming.
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Sentiment among New Zealand farmers has lifted slightly but overall remains deep in negative territory due to a wide-ranging mix of farmer concerns, the latest Rabobank Rural Confidence survey says.

Completed in June, the survey found farmer confidence in the broader agricultural economy was up marginally on the previous quarter with net confidence reading rising a single percentage point to minus 57%.

Farmers were also more positive about the prospects for their own farm business performance, with the net confidence reading for this measure rising to minus 35%, from minus 45% previously.

Rabobank New Zealand chief executive Todd Charteris said primary producers’ confidence in the broader agri economy, as well as their own farm business performance, has now risen for two consecutive quarters after both measures fell to historic lows in the final quarter of 2022.

“While it is pleasing to see confidence continuing to climb – albeit incrementally – it’s important to note that it’s coming from an extremely low base and that farmer sentiment across all key agricultural sectors remains incredibly fragile,” he said.

Charteris said farmers’ gloomy outlook for the year ahead is being driven by four key concerns.

“As with the last several quarters, the survey found the two most pressing issues were rising input costs and government policy,” he said.

“But we did see fewer farmers citing these factors as a concern than was the case in March, with the percentage of farmers mentioning input costs as a reason for pessimism dropping to 57% (from 65% previously) and the percentage mentioning government policy falling to 40% (from 53%) – the lowest reading we’ve seen for government policy as a source of concern since mid-2020.”

He said the easing of farmer concerns over input costs is likely to have been driven by the lower fertiliser prices seen over recent months. The diminished concern over government policy may well be tied to some of the recent agri policy announcements made by the major political parties as they look to attract the rural vote in the lead up to October’s general election.

However, reduced anxiety in these areas is being countered by rising apprehension about falling commodity prices (cited as a concern by 36% of farmers from 30% previously) and rising interest rates (29% from 27%).

 “Prices for New Zealand’s sheep, beef and horticultural products have remained relatively consistent since our last survey, but over this period we have seen Fonterra twice lower the milk price for the 22/23 season, as well as announce an opening milk price forecast range for the new dairy season, which carries a relatively modest mid-point of $8/kg MS. And these announcements have further heightened farmer trepidation around the outlook for dairy commodity prices over the coming 12 months,” he said.

 “In this time, we’ve also seen the Reserve Bank bump up the OCR from 4.75% to 5.50%, and this has, in turn, led to further lifts in farmers’ interest costs.”

 Among the small number of farmers expecting conditions to improve, Charteris said, the major reasons for this view were overseas markets (47%) and strong demand (28%).

“Demand for New Zealand’s food products across a host of international markets remains strong and there are plenty of reasons to be positive about the long-term future of the industry,” he said.

“But right now, all the different sources of worry are taking the wind out of farmers’ sails, and pessimism remains the dominant sentiment being felt across the sector as we move into the second half of 2023.” 

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