Farmer confidence at 5-year high

There’s an air of optimism in rural communities and that’s been confirmed by a Rabobank survey:

Confidence among New Zealand farmers is at its highest level in five years,
buoyed by strong dairy prices and an improving outlook in the red meat sector.

The latest quarterly Rabobank Rural Confidence Survey – completed late last month – has showed New Zealand farmers are increasingly optimistic about the outlook for both their own enterprises and the overall agricultural sector.

After registering a large rally last quarter, confidence in the overall rural economy remained at high levels, with 54 per cent of farmers expecting conditions to improve over the next 12 months (the same as last survey) and only six per cent expecting them to worsen (down from eight per cent).

Farmers’ expectations of their own businesses had also climbed, with 57 per cent expecting their farm business performance to improve over the coming year (up from 55 per cent previously) and only five per cent expecting it to deteriorate (compared with 10 per cent last survey).

Rabobank New Zealand CEO Ben Russell said while spring was typically the time farmer confidence was at its highest, the current favourable climatic conditions, combined with improving product returns across most agricultural sectors, had increased confidence even further this year.

Mr Russell said dairy farmer confidence had remained at similar elevated levels seen in the previous survey, in the wake of a record milk price forecast for the current season (at NZD 8.30/kgMS) and generally very good spring conditions lifting milk production.

“Dairy farmers are reporting the same high levels of confidence we have been seeing in the sector since the middle of the year, with their optimism being driven particularly by high commodity prices, good overseas markets and the current milk price forecast, “ he said.

Mr Russell noted that while dairy farmer confidence was very high, there was likelihood that dairy commodities prices would ease from record high levels into 2014. “And this is something Rabobank believes should be factored into producers’ planning and budgets for next season,” he said.

For sheep and beef farmers, more than half (56 per cent) now reported they were expecting the agricultural economy to improve in the next 12 months, up from 52 per cent with that expectation previously.

The number of sheep and beef farmers expecting their own farm business performance to improve also increased, to nearly half (49 per cent), climbing from 45 per cent.

Mr Russell said improving commodity prices were buoying the red meat sector, with lower stock numbers – particularly less availability of lambs – following last summer’s drought contributing to the positive outlook for commodity prices among farmers.

“At the start of the new processing season, farmgate prices are two to three per cent ahead of the prior year for lamb,” he said.

The Rabobank survey showed New Zealand farmers’ investment intentions remained strong, with 94 per cent of those surveyed expecting to increase or maintain the level of investment in their farm businesses (compared with 92 per cent in the previous survey).

“Sheep and beef farmers’ investment intentions have shown the greatest improvement,” Mr Russell said. “A total of 95 per cent of farmers in this sector reported they intended to maintain or increase investment in their businesses. This was up from 91 per cent last survey and from more than 83 per cent 12 months ago.”

In line with the overall high confidence levels, farm viability was also up – with 68 per cent of farmers considering their business viable or easily viable. This was an increase from 60 per cent in the previous survey.

“Importantly, sheep and beef farmers’ assessment of their own viability has increased to 54 per cent (up from 48 per cent previously), pushing back into net positive territory for the first time in 2013,” Mr Russell said.

Any dairy farmers who aren’t confident now almost certainly have problems of their own making.

It’s not often good production and a high payout happen at the same time, but it is this season.

The outlook isn’t as rosy for sheep and beef farmers but it is still positive.

This is very good for the rural sector, it’s good for the wider economy where at last employment is growing and unemployment is falling.

Latest labour market data shows continuing growth in employment and decrease in unemployment as the economy strengthens, Tertiary Education, Skills and Employment Minister Steven Joyce says.

Today’s Household Labour Force Survey shows employment was up by 1.2 per cent – 27,000 people – in the September quarter and 2.4 per cent in the year to September – 53,000 people.

The unemployment rate fell from 6.4 per cent in the previous quarter to 6.2 per cent.

“While unemployment is still higher than we would like, it has declined from 7.2 per cent a year ago, and the overall trend is of an improving labour market as the economy picks up. The Government is working across a number of fronts to help bring the rate down further,” Mr Joyce says.

“The economy grew at around 2.5 per cent in the year to June 2013, one of the highest rates in the OECD.

“Our participation rate grew to 68.6 per cent, up 0.5 percentage points, and remains significantly higher than Australia’s at 65 per cent.”

Wages continue to rise faster than inflation. Average weekly earnings rose 2.9

per cent in the last year, compared to inflation of 1.4 per cent.

The NEET rate for 15 – 24 year olds – youth not in employment, education or training – continued to fall, to 11.4 per cent over the quarter, the lowest since December 2008. The NEET rate for 20 – 24 year olds fell by 1.8 to 14.1 per cent.

“Momentum in the New Zealand economy is continuing to grow, with September’s trade data confirming the recovery from last summer’s drought is underway, along with the highest increase in permanent and long-term migration in over a decade,” Mr Joyce says.

Business confidence rose to 14 year highs in September’s Quarterly Survey of Business Opinion and in October’s ANZ Business Outlook.The recent Grant Thorndon International Business Report puts New Zealand sixth out of 44 economies in terms of business confidence. . .

These two surveys add another couple of stones to the foundation of good news which is helping to build that brighter future we were promised.

In #gigatownoamaru confidence is building too as the town seeks to become the Southern Hemisphere’s fastest town.

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