Rural confidence falls again

Business confidence has dropped again among New Zealand's farmers, continuing the slide begun in late 2004, according to a banker's survey released today.

The latest ACNeilsen/Rabobank Rural Confidence Survey found the number of farmers with a negative outlook rose -- 28 per cent expecting conditions to worsen over the next 12 months, compared with 22 per cent last survey.

But Rabobank said agricultural confidence was higher than levels seen 12 months ago, when only 9 per cent had an optimistic outlook, while 40 per cent of farmers had expected conditions to worsen.

A total of 71 per cent of farmers expect the agricultural economy to improve over the next 12 months, down from 78 per cent with that view in the previous quarter.

While most indicators in the latest rural confidence survey remained at similar levels to the previous survey two months ago, there was a drop in the number of farmers expecting interest rates to rise.

The majority of those surveyed remained consistent in their views about both the positives of the agricultural economy and their intentions to maintain investment in their businesses.

Rabobank New Zealand general manager Doug Crombie said the latest survey "not surprisingly" showed an expectation of increasing costs in the coming year.

"A total of 77 per cent of farmers expect costs to increase next year and, with inflation running close to the Reserve Bank's cap of 3 per cent and the impact of further fuel prices yet to come, these expectations are well founded," he said.

But cost expectations were balanced by nearly 70 per cent of farmers in the survey expecting income returns to be the same or increase.

"This result was before the recent drop in the value of the NZ dollar and shows a confidence from farmers in international prices," he said.

Mr Crombie said global demand for dairy commodities remained strong: "Along with the dollar slipping below the 70 cent mark, this can only be good news for farmers".

But the latest survey showed sheep and beef farmers are more confident about their income increasing over the next 12 months than their dairy colleagues.

Only 18 per cent of dairy farmers now expect their income to improve over the next 12 months, compared to 32 per cent in April.

In comparison, 27 per cent of beef farmers now expected their incomes to improve, up from 19 per cent in the previous survey.

Mr Crombie said the prospect of beef prices being maintained for a longer period following the second BSE case in the United States was also likely to sustain the current confidence beef farmers have in their income levels.

The rural confidence survey is based on a panel of 800 pastoral and cropping farmers throughout New Zealand, and the next analysis of its results will be released in September.

- NZPA