Off-farm uncertainty drives farmer confidence down

Rural Exchange 29/09/2018

Growing pessimism among dairy farmers is being blamed for a drop in confidence in the rural sector.

The 'Rabobank Rural Confidence Survey' shows farmer confidence has eased from the previous quarter and is now at net negative levels for the first time since early 2016.

The third quarterly survey for the year says net farmer confidence has fallen to -3 percent, down from the two percent increase recorded in the June 2018 survey.

Rabobank New Zealand General Manager for Country Banking Hayley Gourley said the slide into net negative confidence was driven by rising dairy farmer pessimism.

"Dairy farmer confidence in the agricultural economy fell sharply with the net confidence reading among dairy farmers dropping from 14 percent last quarter to minus nine per cent in this survey," she said.

"This fall is not particularly surprising given dairy commodity prices experienced some downward pressure since the last survey, as well as Fonterra trimming farmgate milk price expectations for the current season by 25 cents to $6.75/kgMS," Ms Gourley said.

Not all bleak news

The survey found confidence in the broader agricultural economy lifted among sheep and beef farmers compared to last quarter. 

Sheep and beef farmer optimism moved from negative to positive territory, jumping from minus six percent last quarter to plus seven per cent in this survey.

"Sheep farmers are having a good run with intense procurement competition for tight lamb supply seeing unprecedented farmgate prices this season," Ms Gourley said.

A weaker New Zealand dollar is also underpinning price support for red meat returns and we anticipate elevated prices to continue over coming months," she said.

Twenty-six percent of surveyed farmers were expecting to increase their investment spend, while nine per cent anticipated their investment to decrease. 

The majority of farmers (64 percent) expect their level of investment in stock, plant and land to remain the same over the next 12 months.

"Investment intentions dropped across all sectors, with horticulturists registering the largest fall dropping to a net reading of 15 percent from 41 percent previously," Ms Gourley said.

Results at a glance

New Zealand farmer confidence in the broader agricultural economy has eased from last quarter and is now at net negative levels  the first net negative result since 2016

Confidence in the agricultural economy was down among dairy farmers but rose among sheep and beef farmers

Concerns over government policy and falling commodity prices were the main reasons cited for farmer pessimism

Farmers' expectations of their own farm business performance are down on last quarter but remain at positive levels overall

Farmers' investment intentions were back slightly from last quarter with all sectors recording reduced investment intentions.

Conducted since 2003, the Rabobank Rural Confidence Survey is administered by independent research agency TNS, interviewing a panel of approximately 450 farmers each quarter.

Watch the full interview with Hayley Gourley on Rural Exchange above.

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