Farmers regain 'mojo', confidence survey shows

Farmer confidence in the economy has significantly improved from the ‘depression-like’ levels recorded six months ago, according to Federated Farmers’ latest farm confidence survey.

“While farmers are still not overly optimistic about either the general economy or the profitability of our farms, the depression-like figures recorded in July have eased,” says Don Nicolson, President of Federated Farmers.

“Yet Farmers remain divided about whether the economy will improve or deteriorate over the next 12 months with equal numbers in both camps.

“Federated Farmers remains concerned about the international economy we depend upon.

“Last July, due to falling commodity prices, we were worried the New Zealand economy may enter an ‘L’ shaped recession. The commodities correction in the second half of 2009 has been positive but the high dollar has wiped out the benefits in the meat and fibre sectors especially.

“We still see risk of a ‘W’ shaped recession. As exporters, we’re aware of the negative sentiment coming out of the United States and Europe with a tightening bias in China.

“Yet, reflecting higher payout forecasts, dairy farmers have swung from being the most pessimistic industry we survey, to now being the most optimistic. A significant majority of dairy farmers expect improvements both in the economy and in their own farm’s profitability.

“They also expect to increase production and on-farm spending while tackling debt.

“On the flipside, both sheep and beef farmers and, to a lesser extent, grains farmers, have become the least optimistic. The prices these farmers receive as well as the high exchange rate are impacting on-farm returns and overall financial viability.

“To the perennial worries of interest rates and on-farm costs, we can add the current drought-like conditions. This is of concern in a country that has ample rainfall but lacks water storage infrastructure. A large number of grains farmers want the Government to prioritise water storage and irrigation projects, which is also a priority for the Federation nationally.

“Dairy farmers also wanted much-needed clarity from the Government on its climate change policies. Regulatory uncertainty is affecting long-term investment decisions.

“Six months ago farmers expressed their unease at the level of Government spending and that concern remains. Farmers want to see the Government focus on the economy and tackling its level of public spending.

“Farmers see public spending as a reason why the dollar remains stubbornly high and is adding to inflationary pressures they will bear the brunt of, when the Reserve Bank initiates tightening. Public spending is also delaying a rebalancing of the economy in favour of the tradable sector, too.

“We expect the Reserve Bank in Thursday’s OCR announcement will remind the Government to cut back on its spending. The Government has to listen.

“With less than seven cents out of every export dollar residing in the pockets of farmers, getting a fairer share of the billions we generate for New Zealand is a major priority going forward,” Mr Nicolson concluded.

For a copy of the report, please click here