Farmer confidence falls in first quarter on downbeat dairy, sheep farmers

New Zealand farmer confidence fell in the first quarter, as downbeat dairy, sheep and beef farmers outweighed more optimistic horticulture growers.

Some 53% of farmers were pessimistic about the outlook for the agricultural economy over the next 12 months, from 30% in the previous quarter, according to Rabobank's latest rural confidence survey. Only 11% were expecting conditions to improve, down from 24% last quarter. That led to a net rural confidence reading for the quarter of negative 42%, compared with a negative 6% last quarter and the second-lowest level recorded in the past 10 years.

The decline in sentiment in the latest survey was led by dairy farmers, with 52% expecting a poorer farm business performance over the coming 12 months, compared with 28% in the previous survey, while just 7% expected it to improve, down from 32% previously. Some 38% of dairy farmers expected to pull back on farm investment over the upcoming season. The survey showed just over half of dairy farmers were expecting to make changes to their farming systems over the next two years, with two-thirds of those expecting to further de-intensify their dairying operations over the coming months.

"Given the length and severity of the current downturn that is now being experienced in the dairy sector, which has such a dominant position in New Zealand's agricultural economy, it is not surprising that rural confidence is again at this low level," Rabobank New Zealand general manager for country banking Hayley Moynihan said in the report. "The effects of the dairy downturn are not just confined to the sector itself but also have a knock-on impact on the wider economy and community and naturally influences sentiment across the board in other rural sectors."

Falling commodity prices were cited by 83% of farmers as the reason for their negative outlook on the year ahead, with commodity prices being nominated as the main concern across all sectors.

Sheep and beef farmer sentiment about the outlook for their businesses also declined, with 27% expecting a worsening business performance, compared with 19% last quarter, due to lower lamb and sheep meat prices.

However, Ms Moynihan said prices may improve as a shortage of lambs looms towards the latter half of 2016.

Horticulture farmers had the most positive view, with 54% expecting their own business performance to improve in the year ahead and only 9% expecting a deterioration. Just over half of horticulture farmers are looking to increase investment in their orchards over the coming 12 months, up from 41% last quarter.

"Seasonal conditions for many growers have been largely supportive of strong crop yields and improving market access in strategically important regions, particularly Korea, is set to bolster returns for key horticulture industries in the coming year," Ms Moynihan said.

(BusinessDesk)