NZ farmer confidence jumps to a record high on improved commodity prices

New Zealand farmer confidence and investment intentions jumped to record levels in the second quarter of this year, buoyed by improved commodity prices.

Rabobank said net farmer confidence rose to 54 percent from 27 percent in the March quarter, hitting the highest level since its survey began in 2003. Investment intentions lifted across all agricultural sectors, with 40 percent of farmers expecting to increase investment in the next 12 months, up from 31 percent last quarter and also at a record high.

Farmers across all agricultural sectors were more positive about the outlook for the agricultural economy, with 71 percent citing improved commodity prices as a key reason for increased optimism. This was particularly the case for dairy farmers, 77 percent of whom cited improved commodity prices, and sheep and beef producers, at 66 percent.

"Buoyancy in the pastoral sectors is underpinned by strengthened farmgate returns across the industries," said Rabobank New Zealand general manager for country banking Hayley Moynihan. "Sheep and beef farmgate prices continue to hold steady at strong levels for beef and higher than initially expected for lamb, and lower supply from New Zealand as well as other key export regions will underpin good returns over the coming months.

"Dairy commodity prices continue to strengthen thanks to steady demand and lower supply and this has been recently reflected in strong opening price signals for the new 2017/18 season by many dairy processors."

More than half of farmers surveyed were anticipating the performance of their own farm business to improve over the next 12 months, lifting net confidence to 47 percent, the highest reading since late 2013.

Sheep and beef farmers recorded the biggest rise in confidence in their own farm business performance, jumping to a net 41 percent from 2 percent last quarter, while dairy farmer confidence lifted to a net 61 percent from 54 percent and horticulturalists eased to 38 percent from 44 percent.

"It's very unusual to have farmers from all of New Zealand's key agricultural sectors so confident about the outlook for their own business's performance and this bodes well not just for the rural economy but for New Zealand's economy," Moynihan said.

Horticulturalists had the strongest investment intentions, with 52 percent of those surveyed expecting to increase investment in the coming 12 months, up from 48 percent last quarter. Dairy farmers recorded the biggest jump in investment intentions with 43 percent looking to increase investment, up from 29 percent last quarter, while 32 percent of sheep and beef producers expected to invest more, up from 28 percent.

The survey found that 40 percent of farmers expected to spend more on animal feed, fertiliser or machinery in the next year in comparison to the previous year, while only 8 percent were expecting to spend less.

"Dairy farmers, in particular, will be looking to increase farm expenditure given the belt-tightening that has been required over recent seasons," Moynihan said. "With positive margins likely for dairy producers this season, farmers are now able to consider reinvesting in their businesses for items put on the backburner over the last three years, such as technology, shed improvements and new equipment."

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

(BusinessDesk)