Rural Confidence Down but Business Intentions Robust

Farmers’ concerns about  world commodity prices contributed to an increase in those expecting the agricultural economy to worsen in the next 12 months.

The latest quarterly Rabobank Rural Confidence Survey shows 33% of farmers expect the agricultural economy to deteriorate in the next year, up from 29% who had a gloomy outlook in November last year.

The number of farmers expecting stability dropped from 44% to 38% but there was a slight increase in those expecting an improvement, 27% compared with 26% in the previous survey.

Sheep and Beef farmers’ outlook had improved and dairy confidence had stabilised.

Rabobank general manager Rural New Zealand Ben Russell said . . . “Although dairy farmer confidence remains at subdued levels on a net basis, the over-riding message coming from dairy producers appears to be one of anticipated volatility.”

The survey was taken before last week’s announcement from Fonterra of a 10 cent increase in the forecast payout.

The last two on-line auctions for Fonterra’s globalDairyTrade have shown a slight improvement in price, the next one is scheduled for tonight.

Sheep and beef farmers were more confident with 74% expecting conditions to improve or stay the same compared with 70% in the previous survey and only 23% expecting a deterioration in the agricultural economy.

The improvement is attributed to a lower New Zealand dollar and decreased supply here and in competing markets

Uncertainty about commodity prices was the factor cited most by those who expect conditions to deteriorate and improve.

“It appears to be a case of a glass half full or glass half empty whent it comes to commodity prices, Mr Russell said. “Of those farmers expecting conditions to worsen, 47% nominated falling commodity prices as a concern. But for those anticipating the agricultural economy to improve, 44% cited rising commodity prices as a reason.”

Farmers were more optimistic about their own businesses than about the rural economy in general.

Of those surveyed, 34% expected their farm businesses to perform better in the next 12 months, while just 23% expected their own business performance to worsen.

The difference was most marked in sheep and beef and mixed farmers with 23% expecting the rural economy to worsen but only eight percent predicting things to get worse on their own farms.

Farmers’ investment intentions remained relatively robust, the survey showed, with more than half of those surveyed, (57%) indicating they would maintain the same level of investment in their farm enterprise, while 22% expected to increase investment.

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It may be crystal ball gazing but confidence is important because farmers who aren’t confident about their own businesses stop spending which impacts on the people who work for, contract to, supply and service them.

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