Confidence on rise for dairy sector

Farmers' confidence in the economy and their own businesses improved in the survey.

Farmers' confidence in the economy and their own businesses improved in Federated Farmers' mid-season Farm Confidence Survey.

The survey, undertaken for Federated Farmers by leading agricultural market researchers Research First, had the following overall findings:

• Farmers' confidence in the general economy has improved, but remains in slightly negative territory (net score of -2.0).

• For the first time in three years, farmers' net confidence in the profitability of their farms is positive (net score of +15.5).

• Farmers' production expectations have increased slightly (net score of +16.8), although this overall increase is carried by dairy farmers, who are the only industry group whose production expectations have increased.

• For the first time in two and a half years, farmers expect their on-farm spending to increase (net score of +2.5).

• For the first time in two and a half years, farmers expect to see a reduction in farm debt (net score of -15.0).

• Farmers are finding it increasingly difficult to recruit skilled and motivated staff (net score of +23.6).

• In February 2017, the greatest concern for farmers is farmgate and commodity prices (selected by 27.8 per cent of respondents) followed by regulation and compliance costs (selected by 17.2 per cent of respondents). At the same time, Farmers perceive the highest priorities for the Government to be to reduce regulation and compliance costs (selected by 16 per cent of respondents) followed by general economy and business development (selected by 15.2 per cent of respondents).

"This is good news but the improvement in confidence is fragile. The result was influenced heavily by dairy farmers who saw big increases in dairy commodity prices in the second half of 2016, which have since come back a bit," Federated Farmers president Dr William Rolleston said.

"The overall results mask differences between sectors. Dairy farmers are considerably more confident than their sheep and beef counterparts, whose confidence, especially in their own profitability, has if anything worsened. This reflects the dramatic improvement in dairy commodity prices in the second half of 2016, albeit off a low base, and slippage in meat and wool commodity prices.

"To illustrate, the ANZ Commodity Price Index for Dairy was up 41 per cent in NZ Dollar terms from July to December, which enabled Fonterra to increase its milk price forecast for the current season to $6 per kg milk solids," Dr Rolleston said.

"In contrast, the ANZ Commodity Price Index for Meat, Skins and Wool went down 6 per cent over the same period. Sheep and beef cattle numbers have also continued to fall due to economic factors and the lingering impacts of drought in some areas.

"It's an election year and Federated Farmers urges all political parties to look closely at the information on farmer concerns and priorities for government," Dr Rolleston said.