Friday, March 29, 2024

Pastoral farmer confidence up

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Sentiment remains at negative levels among New Zealand farmers in the latest Rabobank Rural Confidence Survey, despite rural confidence rising to its highest level since late 2019.
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After falling marginally in the September 2020 quarter, the final survey found net farmer confidence was up to -23% from -32% recorded in the last quarter. 

The survey, which was completed last month, found a small increase in the number of farmers expecting agricultural economic conditions to improve in the coming 12 months, while there were less farmers expecting conditions to worsen.

The number expecting the performance of the agricultural economy to stay the same rose to 44% from 40% last quarter.

Confidence was up among the pastoral sector with dairy, sheep and beef farmers citing improved demand and overseas markets as the key reasons for a positive outlook, Rabobank New Zealand chief executive Todd Charteris says.

“Demand for NZ dairy products has held up well since the last survey in September and GDT event results have trended upwards over recent months,” he said.

He says Fonterra’s recent 40 cent lifting of the midpoint of its farm gate milk price range would have boosted spirits among dairy industry participants.

While sentiment was up this quarter, Charteris says overall confidence among pastoral farmers remained mired in negative territory amid concerns over government policy and covid-19. 

“Government policy and covid-19 remain the most significant concerns for NZ’s pastoral farmers with these factors cited as a source of apprehension by more than half of dairy, sheep and beef farmers holding a pessimistic outlook for the year ahead,” he said.

 The survey found horticulturalists continue to be the most optimistic of all the sector groups about the outlook for NZ’s broader agricultural economy, however, growers are now less positive than last quarter.

“Grower confidence slipped marginally from September, with this largely attributable to concerns related to covid-19 and the associated labour shortages in the sector that have arisen due to covid border restrictions,” he said. 

Farmer expectations for their own farm business were also up, driven by improved expectations among dairy farmers.

The survey found 18% of farmers expected their own farm businesses to perform better in the year ahead (up from 13%), 34% were expecting worse performance (down from 37%) and 48% were unchanged.

Satisfaction rates between farmers and their banks were also down.

In a separate survey of 1341 farmers by ResearchFirst on behalf of Federated Farmers, 65.4% said they were satisfied or very satisfied with their bank relationship. That’s down from 68.5% from the Feds’ survey in May.

Federated Farmers president and commerce spokesperson Andrew Hoggard says satisfaction had slipped over the past three years from 80.8% in November 2017.

“That’s probably no great surprise. Banks have been trying to reduce their exposure to agricultural lending as it is considered risky, including by the Reserve Bank,” Hoggard said. 

“Banks put the pressure on farmers to reduce their debt when commodity prices are good to put them into a better position to weather the next downturn, and there is also a trend by banks to diversify agricultural lending from dairy to other sectors, especially horticulture.”

He says agricultural debt had been squeezed down as a result and dairy farming has been bearing the brunt, with dairy debt down almost $2 billion over the past year to $39b.

A positive from the survey was the slight drop in farmers feeling under pressure from banks, from 19.3% in May to 18.4% last month. 

Hoggard says the further postponement of the Reserve Bank’s stiffer bank capital requirements for higher risk margins trickling down to the trading banks’ stance was a possible reason for that.

Farmers’ bank pressure sentiment peaked at 23.2% in November last year, but despite the recent easing in pressure it remains a lot higher than earlier surveys when it ranged from 5% to 10%.

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