Thursday, April 25, 2024

Farm confidence a mixed bag

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Federated Farmers says the new Government’s commitment to making sure the regulation affecting farmers is workable and practical has brought a lot of positivity for farmers.
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Farm confidence has lifted overall, but there are some big differences in optimism levels between the industry groups.

Federated Farmers’ January Farm Confidence Survey show confidence has recovered since last July when the rural mood slumped to an all-time low in the survey’s 15-year history. 

However, a deeper dive into the results shows variation between dairy, arable, meat and wool, and other farmers. 

While all the industry groups saw improvements in their perceptions of current and future economic conditions, dairy stood out for having the biggest improvement since last July’s survey. 

Federated Farmers national dairy chair Richard McIntyre says the main driver has been a lift in dairy commodity prices and forecast farmgate milk prices.

“It’s been a big relief to see the milk price going up – it’s essentially reached break-even point for most dairy businesses now – and it’s also looking positive for next year. 

“It also looks like interest rates, which are a huge component in most dairy farmers’ farm working expenses, have reached their peak.” 

McIntyre says dairy farmers’ input costs remain high, but annual rates of increase have eased.

The change in Government has also made a big difference to the mood, he says.

“Dairy farmers have really felt the brunt of the regulation over the past six years. It’s affected all farmers, but particularly those with intensive systems. 

“The new Government’s commitment to making sure the regulation affecting farmers is workable and practical has brought a lot of positivity for farmers.

“That doesn’t mean there aren’t clouds on the horizon, like regional council plans, but there’s a feeling out there that things are going to get better – or at least won’t get worse.”

Meanwhile, the survey showed arable farmers had the smallest improvement in confidence about current economic conditions and were the most pessimistic industry group, with 83.3% saying conditions were ‘bad’. 

Asked about their current profitability, 23% said they were making a profit, 43% breaking even, and 30% making a loss. 

David Birkett, Federated Farmers arable chair, says there’s not really much for arable farmers to feel positive about right now. 

“For arable, and sheep and beef farmers too, nothing has really changed much in the marketplace. The economics aren’t great. 

“We saw really good grain prices last year with good access to a lot of contracts, but grain prices have dropped by about 30% this year and the number of contracts available has dropped by about 50%.”

While arable farmers can often bolster their income by bringing sheep in when grain prices are low, that’s not a viable option right now because sheep meat prices are also poor, Birkett says.  

Compared to last July, arable farmers are feeling less pessimistic about where economic conditions are going in the year ahead and about their profitability expectations. 

“I think that lift in optimism will be because we have a new Government that’s moving to ease the regulatory load on farmers,” Birkett says. 

“One positive thing is that we just had a really good harvest. If it wasn’t for that, confidence in the survey could have been a lot be worse.” 

For meat and wool farmers, the survey indicates there’s a feeling that the only way is up. 

Although 73.8% think current general economic conditions are ‘bad’, and 45.5% report making a loss at present, there’s been a big improvement in their expectations for future economic conditions. 

Meat and wool also had a large lift in profitability expectations – the largest of the industry groups – and it is now the least pessimistic industry. 

Federated Farmers national meat and wool chair Toby Williams says those results match how he’s feeling and what’s he’s hearing from others in the sector. 

“Meat prices have been falling for nearly two years, wool’s terrible, and we’ve faced sharply higher input costs – but there’s a feeling now that this is about as bad as it can get. 

“We’re either at rock bottom or very near to it, so there’s more opportunities for it to improve than get worse.” 

The farmers he’s speaking with locally are “doing it tough”, but no one is talking about giving up, Williams says.

“They’re seeing it as a temporary blip, and we have to hope it really is just a blip. 

“We can probably stomach another year of this before the banks start to get a bit scratchy.” 

Federated Farmers’ next Farm Confidence Survey will be in July 2024. 

Hear Wayne Langford and Auckland farmer Tim Dangen discuss the state of rural confidence in episode four of the Federated Farmers Podcast.

Federated Farmers, New Zealand’s leading independent rural advocacy organisation, has established a news and insights partnership with AgriHQ, the country’s leading rural publisher, to give the farmers of New Zealand a more informed, united and stronger voice. Feds news and commentary appears each week in its own section of the Farmers Weekly print edition and online.

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