Confidence low leading up to Fonterra boost
The faith of dairy producers in their farming prospects is still being tested, but sheep and beef farmers are more upbeat about their business performance in the year ahead.
Dairy farmers have been weighed down by low prices and tough market conditions and while optimism remains down better results in Global-Dairy Trade auctions have at least prevented spirits from falling lower in a rural confidence survey by Rabobank.
The bank’s survey of about 450 farmers was completed early this month before Fonterra lifted its forecast payout on Thursday and before the third GDT rise in a row.
The bank says farmer sentiment remains low with dairy producers carrying the most negative outlook after its survey regis- tered a small rise in farmer confidence. Dairy farmers had yet to start feeling optimistic about a price recovery for this milking season, however, beef and sheep producers expressed a more positive outlook for the performance of their farm businesses in the year ahead.
Overall, most farmers expected conditions in the rural economy to deteriorate rather than improve. More than half of the country’s farmers (53 per cent) held the view that conditions would worsen over the coming year.
This was down from 56 per cent the previous survey.
Farmers expecting improvement in the agricultural economy increased slightly to 14 per cent, up from 11 per cent, while 32 per cent of them expected similar conditions to the previous year.
Sheep and beef farmers were increasingly positive about their own businesses, with 27 per cent carrying an optimistic outlook for the year ahead, up from 22 per cent the previous quarter year.
Only 12 per cent of those surveyed in this sector expected their business performance to worsen, down from 25 per cent previously.
Rabobank New Zealand Country Banking manager Hayley Moynihan said about 90 per cent of sheep and beef farmers were looking to increase (18 per cent) or maintain (72 per cent) their investment on farms.
‘‘Increased confidence in this sector is largely attributable to the strong upswing in beef prices, with bull beef prices around 33 per cent higher than what was reached this time last year.’’
Moynihan said the latest survey continued to reflect the two consecutive seasons of low dairy prices that were weighing not only on sentiment in the dairy industry, but right across the wider economy. ‘‘With dairy representing nearly 30 per cent of the value of all New Zealand exports, the farmgate milk price is not only having a huge impact on export revenue, but on the wider economy as farmers reduce their spending.’’
This had ‘‘profoundly’’ influenced dairy sector sentiment despite some buffering from lower interest rates and the weaker dollar, she said.
Moynihan said dairy confi- dence could be expected to further improve off the back of last week’s additional large jump of 16.5 per cent in the GDT index, but there was ‘‘still a way yet to go’’ until prices returned to a more sustainable level.
A significant recovery in dairy prices was expected by the bank to arrive by mid-2016 with a drop in domestic milk production helping to adjust export milk supplies.
Farmer confidence particularly in dairying could be expected to lift after Fonterra predicted its milk payment would rise to $4.60 a kilogram of milksolids.
Farmers were monitoring if a strengthening El Nino weather pattern would put pressure on supplies.