Farmer confidence falls on concern about government policy

New Zealand farmer confidence fell in the third quarter, amid rising concerns about government policies and falling commodity prices.

Rabobank said net farmer confidence fell to 38% from a record high 54% in the second quarter. Some 46% of farmers who expected the agricultural economy to worsen cited government policies, the highest level recorded since the information was first collected in July 2011, while 42% cited falling commodity prices.

The impact of farming on the environment featured in the election campaign after a string of reports this year singled out dairy intensification as one of the key factors, alongside urbanisation, putting pressure on the quality of fresh water in lakes, rivers and streams.

"Policies relating to the farming sector have featured prominently during the recently completed election campaign, and the prospect of increased government intervention within the farm-gate appears to be a contributor to the dip in farmer confidence," said Rabobank New Zealand general manager for country banking Hayley Moynihan. "Farmers will have a much clearer idea of what, if any, changes they are likely to face once coalition negotiations are completed and the make-up of the next New Zealand government is confirmed."

Still, she said while farmer concerns about government policies and lower commodity prices may have contributed to lower confidence levels, the survey results indicated farmers were largely optimistic about the agricultural economy in the year ahead.

"This is still a very strong overall result, and, excluding the record high result last quarter, we have to go back to December 2013 to find a higher net confidence reading," she said.

Farmer expectations for the performance of their own business over the next 12 months also slipped but remained strong, with net confidence declining to a net 44% from 47% in the second quarter, which was the highest reading since late 2013.

"With commodity prices for the majority of sectors continuing to improve throughout 2017, most New Zealand farmers are consistently receiving prices for their products that exceed their costs of production," Moynihan said. "As a result, most farming businesses now find themselves in a relatively strong position."

Sheep and beef farmers recorded the biggest drop in confidence about the prospects for the agricultural economy and their own farm business performance. Their confidence in the agricultural economy dropped to a net 22% from 53% last quarter, while confidence in their own business weakened to a net 28% from 41%.

"This is likely to be a reflection of record high beef prices now easing and while lamb prices have strengthened, these may not be sustained for the full season," Moynihan said.

Dairy farmer confidence in the agricultural economy dropped to a net 50% from 58%, and they remained positive about the outlook for their own businesses, with confidence edging lower to a net 57% from 61%.

Bucking the trend, horticulturalists were more optimistic about their own businesses in the latest quarter, with confidence climbing to a net 51% from 38%.

In line with the easing in headline rural confidence, farmers' investment intentions over the next 12 months also came back this survey, after reaching record levels last quarter, with the net investment measure slipping to 22% from 35%.

The survey found 29% of farmers expected to increase their investment spending, while 7% anticipated their investment would decrease. The majority of farmers, some 63%, 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 dairy farmers registering the largest fall, dropping to a net 22% from 39%.

The Rabobank survey is administered by independent research agency TNS and involves interviews with about 450 farmers.

(BusinessDesk)