Farmer confidence: Better and worse

By Nick Clark, General policy manager


Federated Farmers' mid-season Farm Confidence Survey shows farmers' confidence both in the wider economy and in their own prospects is improving, but there is a strong divergence between dairy farmers' sentiment and other farming sectors. It is very much a case of for better - dairy - and for worse - the rest.

Overall, the survey shows an improvement in most indicators since the July 2012 new-season survey. Farmers remain negative about the wider economy's prospects, but are less gloomy than in July. Similarly, despite a slight improvement, farmers remain pessimistic about their own profitability. Farmers are generally positive about production, but are evenly split on whether they will increase or reduce spending. More expect to reduce rather than increase debt, but this intention is less strong than at any time in the last three years. Meanwhile, farmers continue to find it hard to find skilled and motivated staff.

While the overall results seem to indicate a modest improvement in the farming economy, there has been a major divergence between dairy farmers and the rest. Last July, dairy farmers' confidence, like all farmers, was at a low ebb. Improved commodity prices in the second half of 2012 saw payout forecasts increase which has improved dairy farmers' view of their profitability and the wider economy - albeit off very negative bases.

More dairy farmers also expect to increase production and spending and there is only a small drop in those expecting to reduce debt.

In contrast, sheep and beef farmers have not seen improved world commodity prices and the strong dollar further eroded their return on products. Compared to July, sheep and beef farmers have actually become more pessimistic about their profitability and only slightly less negative about the wider economy.

Sheep and beef farmers are also less optimistic about production, partly due to weather concerns in drier areas, and more expect to reduce spending. A large increase in sheep and beef farmers expecting to increase debt is presumably to get through the tough season. Grain farmers' sentiment is similar to sheep and beef.

One area where there has not been diverging views is the difficulty of finding skilled and motivated staff. While dairy farmers are finding it especially hard to find good staff, the labour market remains tight for sheep and beef and grain farmers despite relatively high unemployment nationally.

On the whole, this survey shows farming in a two-speed environment. While it is encouraging that dairy farmers are more positive than six months ago, the ongoing and deepening pessimism in the rest of the farming community is concerning. They will be hoping for a much better second half of the season.

For more information and detailed survey results, go to www.fedfarm.org.nz.

- Hamilton News

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