Farmers' confidence falls to weakest level in six years due to government policies

New Zealand farmer confidence has fallen to the lowest level in six years. Photo / File

New Zealand farmer confidence has fallen to the lowest level in six years amid uncertainty over government policies.

A net 39 per cent of farmers surveyed were pessimistic about general economic conditions over the next 12 months, a deterioration from a net 34 per cent who were pessimistic six months ago, and a net 16 per cent who were optimistic a year ago, according to the latest Federated Farmers July Farm Confidence Survey.

The latest reading is the lowest level of confidence recorded in the survey since July 2012 and a five-fold increase in pessimism in the last 12 months.

Weakening farmer confidence echoes business sentiment surveys showing growing pessimism about the country's economic fortunes under a new administration.

Yesterday's ANZ business outlook survey showed New Zealand business confidence reached a 10-year low in July, with headline confidence and firm's views of their own prospects dropping.

"There seems to be a fear factor at play here," said Federated Farmers vice-president Andrew Hoggard.

"Farmers are feeling very uncertain about what the coalition government will do next on key issues such as water regulations, climate change and industrial relations."

Still, Hoggard noted that pessimism about the economic outlook is a sour note among the otherwise generally positive indicators in the latest survey, with farmer optimism increasing in all areas except their continuing negative perceptions of the economy.

"We should take heart that perceptions of farm profitability, production and spending have become more positive, and that farm debt levels have dropped slightly since the January survey," he said.

Expectations for farm profitability over the next 12 months are up slightly, with 30 per cent anticipating an improvement and 48 per cent expecting profits to remain stable.

Dairy and arable farmers are noticeably more optimistic about profitability than they were in the January survey.

However, meat and wool farmers are noticeably less optimistic, perhaps reflecting a concern that the past season's excellent farmgate prices might not be sustained this season, he said.

In a ranking of their greatest concerns, regulation and compliance costs remains the top issue, and the survey noted heightened concern about pests, diseases and biosecurity, thought to be driven by the stress and uncertainty caused by the campaign to eradicate the cattle disease Mycoplasma bovis.

Climate change policy and the emissions trading scheme was the third biggest concern, reflecting farmer uncertainty over the government's more ambitious approach to reducing greenhouse gas emissions, and concern that agriculture biological emissions may be included in the ETS even though there are - as yet - no significant mitigating actions farmers can put in place, Hoggard said.

The July online survey received 1113 responses from farmers in four industry groups over 24 provinces.