Friday, April 26, 2024

Farmer confidence evenly split on ag economy outlook

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The latest Rabobank Rural Confidence Survey has found an even split between farmers expecting agriculture’s economic outlook to improve and those who think it will worsen.
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The latest Rabobank Rural Confidence Survey has found an even split between farmers expecting agriculture’s economic outlook to improve and those who think it will worsen.

The quarterly survey of 450 people, completed in early September, found that net farmer confidence across the nation fell to a net zero reading, down from a 13% lift in the last quarter.

The number of farmers expecting the rural economy to improve in the next 12 months was down from 32% to 23%, while the number expecting the rural economy to deteriorate rose from 19-23%.

Those expecting similar conditions lifted from 47-52%.

Rabobank NZ chief executive Todd Charteris says while there were plenty of strong factors supporting farmer optimism, a host of concerns were also gnawing away at farmer confidence.

“While demand for New Zealand’s key agricultural commodities remains strong, and commodity prices are holding up well, lingering farmer anxiety over government policy remains a key source of farmer concern with close to three-quarters of farmers expecting conditions to worsen citing this as a reason for their pessimistic outlook,” Charteris said.

Government policy and rising input costs were the key factors cited by farmers holding a pessimistic outlook for the rural economy while rising commodity prices was the key reason nominated by farmers with a positive outlook.

Farmers’ expectations of their own farm business performance were marginally down on last quarter but remain at net positive levels overall.

Dairy farmers are now significantly less positive about the prospects for their own businesses while sheep and beef farmers and growers are marginally more positive.

Investment intentions were marginally higher this quarter with sheep and beef farmers recording the strongest appetite for investment.

The survey also found rising input costs were a key source of farmer apprehension, with this cited by more than a third of pessimistic farmers – the highest level recorded in the survey at any stage across the last decade.

“Whether it’s the recent spike in fertiliser costs, the ongoing impact of labour shortages, or general supply chain challenges, it’s clear that farmers are now feeling significantly more input cost pressure than they have over recent seasons,” he said.

“In addition, farmers identified overseas markets and global shipping disruptions as key sources of concern.”

All sector groups were more pessimistic about the prospects for the agri economy, with dairy farmers recording the biggest fall.

“While the forecast farm gate milk price for the 2021-22 season remains healthy, dairy farmers have had plenty to contend with over recent months, including largely unfavourable weather conditions, challenges sourcing labour and time-consuming consultation meetings on a raft of environmental regulations,” he said.

“On top of this, we’ve seen a general downward pricing trend in GDT auctions since our last survey in June, and all these factors have combined together to drive dairy farmer sentiment lower.”

“As a result, only one-in-five dairy producers is now expecting the performance of the agricultural economy to improve in the next 12 months, well back on the 35% expecting improved conditions last quarter.”

The survey found farmers’ expectations for their own farm business performance in the year ahead was marginally lower than in the last quarter. Fewer farmers expected their business to perform better and more expected that business performance to deteriorate, with those categories changing from 32-28% and 28-32% respectively.

The survey found dairy farmers were significantly less optimistic about the prospects for their own operations. In contrast, sheep and beef farmers and growers were feeling marginally more positive.

“While sheep and beef farmers hold many of the same concerns as their counterparts in the dairy industry, they’ve been buoyed by record pricing for beef and lamb products of late,” he said.

“And with strong pricing forecast to hold over coming months, we’ve seen a slight uptick in the number of sheep and beef farmers expecting the performance of their business to improve over the next 12 months.”

Confidence in the horticulture industry was back in positive territory, with more growers expecting conditions to improve over the next 12 months than those expecting conditions to worsen.

Charteris says the ongoing strong demand from overseas markets was likely to have helped lift that confidence as well as the Government’s decision to allow vaccinated seasonal workers to travel to NZ from the Pacific without having to go through managed isolation from October.

The survey also showed a marginal lift in on-farm investment intentions, with those expecting to increase their investment over the next 12 months up from 24-25%. Eleven percent intended to decrease investment with the balance keeping it the same.

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