Monday, February 26, 2024

Dairy farmers lead rebound in sector confidence

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Government policy a key reason for optimism among producers, Rabobank survey finds.
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Government policy and rising dairy prices have been key drivers for a rebound in farmer confidence, albeit with an expectation that the broader agricultural economy will worsen in 2024.

Following its plunge to an historical low in September, the fourth-quarter Rabobank rural confidence survey showed New Zealand farmer confidence has rebounded strongly off the back of improved dairy farmer sentiment. 

Government policy emerged as a other major contributor to higher overall farmer confidence, with more than half of the 450 farmers surveyed expecting conditions to improve in the year ahead. 

Despite the sizeable uplift, farmer sentiment remains low overall, with a majority of primary producers expecting the performance of the broader agricultural economy to worsen over the coming 12 months. 

The survey found farmer confidence in the agri-economy is up to a net reading of -47% from -72% previously, with 58% of farmers expecting conditions in the broader agricultural economy to worsen over the next 12 months, down from 77% last quarter. Just 11% expect conditions to improve, and  29% expect conditions to stay the same. Rabobank senior agriculture analyst Emma Higgins said while farmer confidence remains weak, farmers across all sectors are more optimistic about the prospects for the agri-economy than they were three months ago.

“Sheep and beef farmers and horticulturalists did both register an uptick in confidence, but it’s dairy farmers who have moved the needle the most, having recorded the biggest lift in sentiment,” she said.

This is largely down to healthier GDT results throughout October and November, which pushed dairy commodity prices higher and contributed to the latest upwards revision of the Fonterra farmgate milk price payout forecast. 

Government policy does still feature as a reason for pessimism, with this cited by 26% of farmers with a negative outlook. 

“But we’ve also seen government policy come through as the major reason for optimism this survey, being cited by 59% of the farmers expecting conditions to improve in the year ahead.” 

Overseas market economies and rising commodity prices are the other key reasons cited by farmers with an optimistic outlook. 

Among farmers with a negative outlook, falling commodity prices, 52%, and rising input prices, 46%, continued as the two most regularly cited reasons for pessimism. 

The survey found farmers across all sector groupings are more optimistic about the prospects for their own farm businesses, with dairy farmers again leading the upwards charge. 

More horticultural growers expect the performance of their own businesses to improve.

“For growers, this improved outlook for their own businesses is likely to stem from ongoing strong overseas demand for NZ fruit and vegetables and increased labour availability.” 

While sheep and beef farmers are now slightly more optimistic about the prospects for their own businesses, they remain deeply concerned about the year ahead. 

“At a net reading of -62% sheep and beef farmer confidence remains depressed,” Higgins said. 

“Beef prices have held up okay, but that hasn’t been the case for lamb prices, which recently fell to their lowest level for this time of the year since 2016.

“With little to indicate an improvement in prices in the short term, sheep and beef farmer sentiment remains in the doldrums as we head towards the end of the year.” 

Higgins said the most pleasing aspect of the survey is the reduced number of farmers who are now assessing their own business as unviable. 

“Over recent quarters we’ve seen an alarming increase in the percentage of farmers who view their own operations as unviable, with this reaching 12% in the September quarter, so it was encouraging to see this number halve to 6% in the latest survey.”

At the other end of the spectrum the survey shows a lift in the number of farmers assessing their own farm as easily viable or viable, 52% from 47% previously.

“It was also encouraging to see stronger investment intentions this quarter, albeit off a very low base.” 

Investment intentions jumped to a net reading of -15% from -36% previously. 

As with the readings for general sentiment, growers had the strongest investment intentions and sheep and beef farmers the weakest.

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