Farmer spirits hit new low level

Farmer confidence has sunk to its lowest ebb in a decade as dairy farmers struggle to balance the books during a slump in dairy prices on the international marketplace.

Experts predict dairy prices were unlikely to recover at the farmgate before the 2016-17 season.

This therefore explained the downcast mood of farmers in the latest rural confidence survey by Rabobank, even though global prices were expected to eventually turn.

Farmer sentiment was at its lowest level since early 2006 and 56 per cent of those surveyed (23 per cent previously) expected conditions in the rural economy to worsen.

About 32 per cent of farmers were expecting similar conditions to last year (40 per cent) and only 11 per cent expected any improvement (36 per cent).

The survey, completed this month, found confidence in the agricultural economy had fallen to a negative reading of minus 45 per cent, down from 13 per cent in the quarter year to March.

Rabobank New Zealand chief executive Ben Russell said dairy farmers were taking steps to reduce costs.

While they were likely to receive a better farmgate milk price than last season, many of them were looking at this being below their full production cost.

‘‘In response to current pricing signals, we are seeing dairy farmers cut back their rates of supplementary feed and some lower their stocking rates by culling lower performing cows, and maximising feed available to a higher quality, but smaller, herd.’’

Russell said the subdued sentiment in the dairy sector and reduced spending by farmers on grazing and feed had major flow-on effects to other agricultural sectors and the wider economy.

‘‘In recent months we have seen the weakness in dairy prices contribute to sluggish growth in the New Zealand economy, weighing on the dollar and increasing expectations of further interest rate cuts,’’ he said.

About 58 per cent of dairy farmers expected a poorer farm business performance over the coming year (23 per cent), and only 16 per cent expected it to improve (44 per cent).

Lower commodity prices were the main reason farmers were pessimistic about conditions in the agricultural economy worsening.

There were concerns about the state of overseas markets and rising input costs.

Fewer farmers were concerned about drought than the previous survey.

‘‘Good rain in April helped alleviate the dry conditions that gripped parts of the country through February and March, notwithstanding that parts of the South Island – particularly North Canterbury – are still facing drought conditions,’’ said Russell.