BNZ confidence survey drop but still positive

The BNZ confidence survey for May shows a drop in confidence with a net 18% of respondents expecting economic improvement in the next year, compared with a net $27% in April.

 However, the comments from farmers were very gloomy:

* Dairy & beef farming. Not good, just focussing on survival. After crash everything edging up except income.

 * Dairying. This season is looking grim. All unnecessary spending is to be stopped. Debt levels are high so have to service this first. Long term dairying is a great industry investment.

 * Commercial Grower Strong signs of demand improving and prices returning to sustainable levels. Outlook very positive.

 * Suppliers to the dairy industry. With constant media negativity about the state and future prospects of the dairy industry, farmers are despondent and lack confidence in their farms being able to turn a profit this season. They are only buying necessities. Because this industry plays such a large role in New Zealand the flow on effects to the wider economy will be profound.

 * Sheep & Beef breeding & fattening. Lamb at the moment is very good. Wool is bad. We passed wool at the sale yesterday. Beef probably not that good.

 * Dairying With the cold winter low grass growth and low advance farmers are in shock

 * Dairy Industry. Falling payout is going to hurt!

 * Sheep and beef/ We are fine for the moment but a huge amount of uncertainty as no fundamentals have changed, just good luck to have a good season and lamb prices together. Trading margins still short and cash flow tight.

 * Ag industry. Dairy payout and strong dollar, not looking good for rest of the year.

These comments reflect the views of the rural grapevine.

Sheep and beef returns are better than they’ve been, but the improvement is coming off a very low base so there’s a lot of making up to do and milk is no longer looking like white gold.

Usually the floating dollar insulates us from drastic falls in commodity prices because when prices drop the dollar follows. However, at the moment commodity prices are low and the dollar is high.

Equity is holding up because there haven’t been many farm sales to fix values on. A couple of Southland real estate agents told me last week that they’ve got buyers with money but they’re watching and waiting.

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