NZ farmer confidence rebounds in second quarter as dairy price improves

Monday 27th June 2016

New Zealand farmer confidence bounced in the second quarter to the first net positive reading in more than a year, with a significant upswing across all sectors as rising dairy prices fuelled positivity.

A net 3 percent of farmers were optimistic about the outlook for the agricultural economy over the next 12 months, from net 42 percent pessimistic in the previous quarter, and the first time optimists outnumbered pessimists since March 2015, Rabobank's latest rural confidence survey says. A quarter of farmers expected conditions to improve, up from 11 percent last quarter, and 22 percent expected conditions to worsen, down from 53 percent. About 52 percent expected similar conditions, up from 34 percent.

"Since the last survey was undertaken in early March, dairy prices have increased in five of the last seven GlobalDairyTrade (GDT) auctions and Fonterra posted an opening forecast farm gate milk price for the 16/17 season of $4.25," Rabobank New Zealand general manager for country banking Hayley Moynihan said in the report.

"While neither the auction prices nor the forecast price will have convinced farmers that the dairy sector is out of the woods, prices are, however, showing signs that global supply and demand for dairy products is rebalancing and will eventually reach a more sustainable level."

Last year's slump in dairy prices weighed on the rural sector, and government figures today showed exports of milk powder, butter and cheese were down 10 percent to $11.13 billion in the year ended May 31.

Rabobank's Moynihan said the size of the dairy industry meant the modest improvement in dairy prices and expectations prices will continue to rise were likely to be the biggest factors in overall farmer confidence improving.

A net 9 percent of dairy farmers were positive about their own businesses in the second quarter, from net 45 percent negative in the previous quarter.

Sheep and beef farmers improved from net 5 percent negative to net 22 percent positive, and net 47 percent of horticulturists were positive, from net 45 percent.

"Record kiwifruit sale volumes for the 2015/16 season and another extraordinary outlook for the new season has ensured that grower optimism for the industry and their own business performance expectations remains high," Moynihan said.

Investment intentions rose to their highest level for more than a year, with 25 percent of farmers expecting to increase investment in their farm businesses up from 21 percent in the previous quarter. The survey also found that half of farmers were looking to change their farming system in the next two years, and 55 percent of horticulturalists and 51 percent of sheep and beef farmers wanted to increase the intensification of their system.

BusinessDesk.co.nz

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