Con­fi­dence slid­ing

Rabobank sur­vey shows gloom on agri­cul­ture prospects, An­drea Fox re­ports

South Waikato News - - RURAL DELIVERY -

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.

Newspapers in English

Newspapers from New Zealand

© PressReader. All rights reserved.