Farmers in deep south feel down

Sheep farm in Otago. Photo / Otago Daily Times

Lower South Island farmers are bucking the national trend with a decrease in confidence about general economic conditions, a Federated Farmers confidence survey shows.

While still comfortably in "positive territory", the region has gone from being the most positive in January to the least positive this month. The upper South Island was now the most positive region.

Most farmers were "looking on the bright side", both for the general economy and particularly for their own farm businesses, national president Bruce Wills said.

That was despite commodity prices coming off recent peaks and the dollar being at record highs against the greenback.

"Any gloss taken off returns seems to have been balanced against an outstanding spell of weather at the tail-end of last season," Wills said.

Since the survey was done, the dollar had appreciated further. The survey was also undertaken before some major policy announcements by major political parties.

Although Labour's policy to fast-track agriculture into the Emissions Trading Scheme (ETS) was known, full details of its proposed capital gains tax were not.

A net 16.4 per cent of respondents were expecting an improvement in the general economy over the coming 12 months, up from 11.6 per cent in January.

Confidence has increased for all industry groups and regions, but the positivity of dairy farmers increased by somewhat less than the confidence of meat and fibre farmers and grain farmers.

Overall, 45.8 per cent of them were expecting their profitability to improve over the coming 12 months, a further improvement from 25.5 per cent in January and 17.3 per cent in July last year.

The increased optimism was based on a relatively benign winter so far and very high world commodity prices enjoyed over the past 12 months, which remained high even after taking account of the strong New Zealand dollar, the report said.

High world prices were forecast to drop back a bit and many farmers were concerned about sustainability of commodity prices, the high dollar and increasing farm input costs eroding their margins.

On balance, more farmers were optimistic about the future.

More farmers were expecting to increase spending while there was a large increase in the proportion expecting to reduce debt.

Climate change policy and the ETS was once again the biggest issue for farmers while they considered fiscal policy, such as reducing government spending and/or government debt, should be the Government's highest priority.

- OTAGO DAILY TIMES