Confidence sliding

Rabobank survey shows gloom on agriculture prospects, Andrea Fox reports

Waikato farmers feeling glum about their income prospects are not alone – a new Rabobank survey shows rural confidence in the economy has slipped further into the negative zone, with farmers now also concerned about the performance of their own business.

The latest quarterly Rabobank rural confidence survey, taken late last month with about 450 farmers, found 44 per cent of the country’s farmers expect the agricultural economy to worsen over the next 12 months.

This compared to 36 per cent in the previous quarter and 10 per cent at the same time last year.

Only 15 per cent of farmers surveyed expected economic conditions to improve.

Fifty per cent of farmers blamed the strong New Zealand dollar and its negative impact on export values, and lower commodity prices for their continuing negative sentiment.

However, confidence in the dairy sector showed a slight lift.

Rabobank New Zealand chief executive Ben Russell said while farmer confidence had been on the slide since March last year, the survey was the first to show farmers now expected a greater negative impact on their own businesses.

The survey showed 42 per cent of farmers expect their own business performance to worsen over the next 12 months, compared to 29 per cent in the previous quarter.

Waikato agribusiness commentators said the survey results mirrored regional sentiment and tight economic times.

Peter Hexter, a director at Morrinsville accountancy firm CooperAitken, said with Fonterra’s advance to its farmers this season at $3.85/kg milksolids compared to $4.40 this time last year, cashflow was tight at a time when farmers must increase spending.

This is an expensive time of year with feed supplement and artificial insemination costs, power bills, extra wages impacting on the farm business, many of which have heavy overdrafts.

Payout prospects for this season are also lower at $5.25/kg compared to the final payout of $ 6.08/ kg for the 2011- 2012, which was also down on the previous season.

On the brighter side, Hexter said interest rates are low and some farmers had been able to negotiate fixed-term rates lower than floating rates.

The long-term outlook for dairying is positive with commodity prices recently lifting slightly, he said.

He urged farmers to work on their budgets and keep communicating with close advisers and their accountants, who could help them flatten out income for tax purposes, through the income equalisation deposit scheme. This helped farmers avoid paying tax for a high income year in a low income period.

But he advised farmers to ‘‘keep their chin up’’.

‘‘It is tough and there are definitely challenges but there is light at the end of the tunnel, and production is up.’’

Waikato Federated Farmers president James Houghton said many farmers ‘‘are back in survival mode’’.

Commodity prices ‘‘aren’t too bad’’ but the strong dollar meant less money for farmers for their exported product.

Dairy farmers were having to find money to fund effluent systems to meet new council requirements for effluent ponds to be sealed and engineers’ reports and increased effluent storage.