High dollar knocks farmer confidence

Photo / Otago Daily Times

The high New Zealand dollar, coupled with tough spring weather conditions, has caused a dip in farmer confidence for the first time in more than a year.

This follows four consecutive quarterly lifts in confidence and contrasts typical 'spring highs' in farm confidence seen in previous years.

The latest quarterly Rabobank Rural Confidence Survey shows net farmer confidence has fallen to 24 per cent from 30 per cent in the previous survey undertaken in July.

The survey found 37 per cent of farmers expected the agricultural economy to improve in the next 12 months, down from 41 per cent who held that view in the previous quarter.

Those expecting conditions to worsen increased to 13 per cent, from 11 per cent previously.

Rabobank general manager New Zealand Ben Russell said overall farmer confidence had taken a knock from high currency levels and poor spring weather conditions in many regions.

Dairy farmers in particular were less confident than the highs recorded mid-year, he said.

"Many farmers have endured very cold and wet conditions throughout winter and spring, and calving and lambing has been extremely difficult in many regions," he said.

While sentiment among sheep and beef farmers improved slightly, it was not high enough to prop up overall confidence.

The rising New Zealand dollar was cited as a concern by 42 per cent of respondents expecting conditions to worsen, while 37 per cent said they had concerns about production after experiencing snow, storms and general poor weather.

There was some cause for optimism among farmers however.

Of those farmers expecting the agricultural economy to improve, 62 per cent nominated higher commodity prices as a reason for their optimism, while 29 per cent were looking to buoyant offshore markets.

"New Zealand farmers have recognised that markets and prices are largely favourable, but that domestic returns will be impacted by the strength of the New Zealand dollar, which has lifted eight per cent against the US dollar since early September," Russell said.

While dairy producers remained the most optimistic of all New Zealand farmers, dairy sector confidence had declined - down from 54 per cent expecting conditions to improve in the previous survey to 42 per cent this quarter.

The decline in dairy confidence was despite milk price expectations not changing from July, Russell said.

Sheep and beef farmer confidence had risen, with 38 per cent expecting an improvement in the agricultural economy, up from 34 per cent with this view last survey.

Farmers' expectations about the performance of their own individual operations were further subdued.

The total number of dairy farmers expecting an improvement in their own business operations had fallen to 47 per cent (from 70 per cent last quarter).

The number of sheep and beef farmers expecting their own farm business performance to worsen had climbed to 25 per cent, up from 15 per cent previously.

"The overall lower expectations farmers had for the performance of their own businesses is also indicative of the reduced production expected for the season, especially among sheep farmers, from the snowstorms and poor weather experienced during lambing," Russell said.

"Dairy farmers are also moderating their production expectations for the season as tough weather conditions for most of the country are impacting the usual steep rise in milk flows seen prior to the spring flush."

- NZ HERALD ONLINE