Farm survey blames gloom on price fall

Pessimists outnumber optimists for the general economy and farm profitability, a farming survey has found.

A slump in farmer confidence has seen Federated Farmers' new-season 2015 Farm Confidence Survey move further into negative territory.

Pessimists outnumber optimists for the general economy and farm profitability.

Federated Farmers President William Rolleston attributes most of the pessimism to the fall in dairy prices, down 46 per cent from their peak on last February.

As a result, the survey shows that nearly 80 per cent of dairy farmers expect their profitability to worsen.

"That should be put in the context, however, of a very strong 2013/14 season with record returns," said Dr Rolleston.

He says that a dry summer is affecting sheep and beef farmers' profit expectations. Farmers have to send more stock to slaughter earlier than usual. "That and a higher than usual dairy cull cow kill has increased supply at meat processors, and that has reduced schedule prices."

Production has been reported as generally good during 2014, bouncing back from 2013's severe drought, but the current dry weather is causing concern for the remainder of the season, especially in the South Island.

Pessimism about profitability is reflected in farmers' spending intentions, with more farmers now expecting to reduce spending than increase spending. This is especially pronounced for dairy farmers.

For the first time since the Global Financial Crisis, more farmers expect to increase debt than reduce debt. Again, this is especially pronounced for dairy farmers who are worried about their cash flow over the coming months and expect to go into overdraft. The support of banks will be important over this challenging period.

The agricultural labour market remains very tight with more farmers reporting greater difficulty finding skilled and motivated staff.

The biggest concern for farmers is commodity and farmgate prices, cited by nearly 33 per cent of farmers. This was followed by the weather, with 21 per cent. Both are up sharply on the previous survey, moving ahead of regulation and compliance costs, with 19 per cent. No other concern attracted more than 6 per cent of respondents.

Farmers' highest priority for the government is regulation and compliance costs, with more than 25 per cent either mentioning it generally or specific hot topics such as health and safety and the RMA.