Dairy farmers most optimistic in agricultural sector for 2016

Photo / Bloomberg

Dairy farmers are the most optimistic group in New Zealand's agricultural sector for the coming year, according to a Federated Farmers poll.

Some 41 percent of dairy farmers are expecting improved market conditions in 2016, ahead of 19 percent of meat and fibre farmers, and 17 percent of arable farmers. Overall, 29 percent expect improved conditions, 19 percent expect conditions to get worse and 52 percent expect market conditions to remain the same, according to 1,100 Federated Farmers members surveyed in the run up to Christmas.

Dairy prices have tumbled this year amid rising supplies, lacklustre Chinese demand and an import ban imposed by Russia.

New Zealand is the world's largest exporter of dairy products, accounting for about a third of international dairy trade. Fonterra Cooperative Group, the country's dominant dairy processor, has offered its farmer suppliers interest-free loans to tide them through the hard times and is betting on an improvement in prices in 2016 to support its forecast payout for the current season.

"2015 will be remembered as a year of low milk prices and adverse events such as droughts and floods that have impacted farmers' bottom lines and put New Zealand's biggest sector under enormous pressure," said Federated Farmers president William Rolleston.

"It is encouraging to see relatively higher levels of optimism among dairy farmers after what they have faced in 2015, however we need to remember the degree optimism for improvement reflects the current market for dairy products verses sheep and beef - the latter having fared better than their dairy counterparts in the last year."

Rolleston said El Nino weather conditions over summer were worsening a drought in the South Island and farmers in general appeared headed for "another tough year".