“At the mid-point in what is a tough 2012/13 season, we are seeing some improvement in confidence since the start of this season. That masks a real split between dairy and the rest of pastoral agriculture,” says Federated Farmers President, Bruce Wills.
“Undoubtedly rising global dairy prices and upward revisions in payout forecasts have helped the dairy sector regain some confidence. Then again, this comes off deep pessimism recorded at the start of the season and things are hardly buoyant now.
“Then we have the strong Kiwi dollar acting like a sea anchor on all export returns.
“What dairy farmers are saying is that they are less pessimistic but this is not the breaking of a new dawn. The good news for the economy is that dairy farmers expect to increase production and spending, with only a small drop in those expecting to reduce debt.
“On the other hand, in the sheep, beef and grain sectors, confidence continues to sink. Meat and fibre farmers have seen prices reverse while the high dollar erodes what they ultimately get paid.
“Beef had been treading water but just this week dropped ten cents per kilogram.
“Sheep farmers are feeling the heat because lamb prices are down around 35 percent on the same time last year. Wool is also struggling and this has seen meat and fibre farmers become even more pessimistic about their profitability.
“That pessimism continues into the wider economy, with a growing sense of frustration about filling skilled vacancies.
“All farmers agree they are struggling to find skilled and motivated staff and this seems odd given unemployment figures. Skilled and motivated dairy staff are especially hard to find so is there a mismatch between where people live as opposed to where the jobs are?
“And these jobs are not low skilled or low paid either. I can say that having reviewed Federated Farmers Farm Remuneration survey we send to our members.
We’ve always had less trouble finding good people for sheep and beef farms than for dairying.
However, the good ones we’ve got in dairying are very good – enthusiastic, motivated and skilled.
“Unlike last season, the mild El Nino means sheep and beef production will likely be down this season. Sheep and beef farmers cannot increase production to offset lower prices and the high dollar.
“As the survey was in the field in the first half of January, the current dry spell will be of mounting concern. We are also aware the ‘dry’ is now biting into dairy production in the North Island especially.
It’s been raining off and on in North Otago all morning which is very welcome after the hot weather of the last couple of weeks.
“While some dairy farmers expect to increase debt most do not, however, more meat and fibre farmers expect to reduce spending and increase debt to get through. It is a concern as agricultural debt approaches $50bn, then again, households now owe over $191bn.
“You can summarise the big issues of concern to farmers as the increasing cost of farming staples, including the cost of regulation and compliance, what we are getting paid for our products and of course, that high Kiwi dollar.
The high dollar also means imports, including big ticket ones like fuel, fertiliser and machinery, are less expensive.
When debt servicing is a major cost, low interest rates are also benefiting farmers.
“It underscores the need for the Government to focus its spending on those things that will increase production while simplifying and streamlining regulation. It may not be ‘sexy’ but it is what the economy desperately needs.
“Tackling the high dollar starts not with a printing press, but by central and local government cutting back on borrowing. While some agriculture debt is about survival, government still has an entrenched ‘borrow and spend’ culture that needs to change.
“Cutting seems to be the policy option ‘that dare not speak its name’ in some quarters.
“Our 2012/13 Mid-Season Farm Confidence Survey shows pastoral farming to be in two speeds. It is encouraging that dairy farmers are more positive than six months ago, but the deepening pessimism of meat and fibre and our grain farmers is concerning.
“We can only hope the second half of the 2012/13 season turns around because the global demand is there and the recently announced Primary Growth Partnership for red meat must deliver what Federated Farmers has striven for; unity,” Mr Wills concluded.
Survey results are here.