KEY POINTS:
Confidence among farmers is tumbling in the face of global financial market concerns and flagging commodity prices, says Rabobank.
The latest Rabobank/Nielsen rural confidence survey shows more farmers expected conditions to get worse than better.
The number of farmers surveyed last month who expect the agricultural economy to
get worse during the next year was 29 per cent, up from 7 per cent in the last survey in August.
And those expecting things to get better plummeted to 26 per cent from 59 per cent.
The number of pessimistic dairy farmers rose to 39 per cent from 4 per cent, while 30 per cent of sheep and beef farmers expected things to get worse, compared with 5 per cent previously.
Confidence has taken a beating.
However, the previous study in August was undertaken before the global credit crisis really hit the financial markets and the real economy, plunging the world into economic turmoil.
Rabobank general manager rural New Zealand Ben Russell says international dairy commodity prices have fallen between 25 and 35 per cent since the last survey.
"While the weaker New Zealand dollar limited the price falls to between 5 and 15 per cent in local currency terms, dairy farmers have recognised that the impact would flow through to the dairy payout," Russell says.
The world has become even more gloomy for dairy farmers since this survey was done.
Fonterra cut its payout forecast to dairy farmers for this season by 60c to $6 per kg of milksolids and based on last season's collection of 1.19 billion kg of milksolids the cut could cost farmers $714 million.
And on Friday the world's biggest dairy exporter slashed its fair value share - purchased by farmers based on milk production - by $1.10 to $4.47 for the 2209-10 season, having already cut it by $1.22 the previous season.
It's a fair bet dairy farmers won't be feeling any more confident come the next survey. Federated Farmers president Don Nicolson says the drop in confidence was no surprise.
"Obviously the global financial crisis has made people think about their position," Nicolson says.
The survey found 68 per cent of farmers expect to feel the impact of the global financial crisis.
"And of course we've been told by our processors and marketers that consumers are watching how they value their spend in the countries we trade with," Nicolson says.
"Where we expected with a lower currency to get better prices perhaps in fact we're just busily trying to tread water."
Consumers around the world are nervous about jobs, mortgages and pensions. Belts are being tightened.
However, despite the recession the long-term fundamentals of food production remain strong - the global population is rising, new markets will grow in developing countries and while people can do without a new car or television they still need to eat.
The drop in confidence shows that farmers are switched on to the global issues, while their gaze can cover decades of highs and lows.
Low confidence now should not be mistaken for low confidence for the outlook in five or 10 years' time.
The Rabobank survey says investment intentions remain relatively robust, with 54 per cent planning to maintain existing investment levels.
DROUGHT FEAR
It's not yet Christmas and the dreaded D-word is already hitting the news.
The Government is keeping a close watch, saying there are a number of areas approaching drought, and Federated Farmers North Canterbury president Chris Sundstrum says farmers need to plan now to avoid a crisis if a drought does happen.
Farmers should be looking to reduce stock numbers as early as possible "as we cannot afford to carry large stock numbers into January", Sundstrum says.
Unfortunately winter rain does not remove the risk of summer drought.
We need regular rain throughout the year. The drought last year was estimated to have wiped $1.24 billion off the farmgate - a bitter pill to swallow but a drought this year with a recession threatening jobs, incomes and taxes would be far more unpalatable.
Federated Farmers is looking for cross-party support for water storage investment.
Don Nicolson says: "If we're worried about climate change and we're worried about food production and export receipts ... we need to perhaps future-proof our plains a lot better then we have."
The threat of two seriously damaging droughts in succession adds weight to Fed's argument.
The MetService's preliminary opinion was for a summer that was neither La Nina nor El Nino, but somewhere in between, with dry periods probably followed by wet ones.
With a bit of good fortune everyone will be happy - holidaymaker sun and decent farmer soil moisture.
In the meantime the Government is right to be getting ready, even if good rainfall in the coming weeks washes the D-word out of the headlines.
STERN RESPONSE
Former Agriculture Minister Jim Anderton laid into the Government's speech from the throne, asking how many times the word agriculture was used.
Not once, Anderton says.
"It never mentioned the primary sector at all," he says.
It was in there once in reference to the Kyoto Protocol and the Government's intention to "advocate firmly in international negotiations for the appropriate recognition of New Zealand's unique agricultural-emissions-profile", but point made.
However, there was much mention of the economy, raising productivity, Resource Management Act and Emissions Trading Scheme.
Despite Anderton's protest there was no obvious complaint from farmers.
After the speech Federated Farmers said it was great to see the Government showing commitment to supporting the productive side of the economy.
Nicolson says the organisation has been talking to the Government and was pretty happy.
"There's a new sentiment in government and it's more usefully disposed towards agriculture," Nicolson says.
"We're looking at the first 100 days and I think that's April 19 from memory and I've got that locked into my phone."
Feds seem happy to let National bed itself into power but it's pretty obvious they have high expectations, including action on the Emissions Trading Scheme and Resource Management Act.
Will National deliver and what happens if it doesn't?
Nicolson's phone is counting the days.
