Farm confidence survey shows 'grass is becoming greener'

Farmers are more confident now than they were in January, according to the latest Federated Farmers Farm Confidence Survey, taken at the beginning of the 2011/12 season.

“Most farmers are looking on the bright side, both for the general economy and particularly, for their own farm businesses,” says Bruce Wills, Federated Farmers President and its economics and commerce spokesperson.

“This is despite commodity prices coming off recent peaks and a dollar being at record highs against the greenback. Any gloss taken off returns seems to have been balanced against an outstanding spell of weather at the tail end of last season.

“However, since the survey was in the field the dollar has appreciated further. Relatively few believe the Government should tackle the Kiwi dollar head-on. Rather, most identified Government-led spending and borrowing as being the priority.

“Economically, a reduction in Government-led spending and borrowing could help moderate the exchange rate.

“The Farm Confidence Survey was also undertaken before some major political policy announcements. While the Labour Party’s policy to fast-track agriculture into the Emissions Trading Scheme (ETS) was known, full details of its proposed Capital Gains Tax wasn’t.

“Overall, I am particularly encouraged by the way debt retirement is prioritised along with productive investment on-farm,” Mr Wills concluded.

Highlights from the July 2011 Federated Farmers Farm Confidence Survey

• A net 16.4 percent of respondents are expecting improvement in the general economy over the coming 12 months, up 11.6 points on January. Confidence has increased for all industry groups and regions, but that of dairy farmers increased by somewhat less than that of meat and fibre farmers and grains farmers

• As has been the case in previous surveys respondents are considerably more positive about the profitability of their own farms. A net 45.8 percent of respondents are expecting improvement in their profitability over the coming 12 months, up 20.3 points on January. Optimism about profitability was up for all industry groups, although again the increase for dairy farmers was less than the other groups. After lagging in January, North Island respondents have caught up with those from the South Island

• Production is expected to increase with few concerns at this stage about adverse weather conditions. A net 50.4 percent of farmers expect to increase production over the coming 12 months, up 25.6 points on January. In January, the weather was the major concern of farmers and this was impacting on production forecasts and on farm profitability.

• More farmers are expecting to increase spending. A net 33.3 percent of farmers expect to increase spending over the coming 12 months, up 11.7 points on January. In part this reflects improved confidence but there is also a price effect with many farmers concerned about increasing input costs.

• Farmers are even more focused on debt reduction with another large increase in the proportion of farmers expecting to reduce debt. A net 45.6 percent of farmers expect to reduce spending over the coming 12 months, up 20.3 points.

• The farm labour market is highly seasonal, but it also appears that it has tightened. A net 5.7 percent of respondents reported it harder to find skilled and motivated staff over the past six months, down 0.1 points compared with January 2011, but up 7.6 points compared with the same time last year.

•  Reflecting recent comments from the Labour Party on when agricultural biological emissions should be brought into the ETS, climate change policy and the ETS has once again become the biggest issue for farmers. 14.5 percent of respondents cited it as their single biggest issue, up 10.4 points on January, but still lower than the 30.1 percent who cited it this time last year when the ETS was implemented.

• As with the January survey, farmers consider that fiscal policy, like reducing government spending and/or government debt, should be the Government’s highest priority. 26.3 percent of respondents cited this as their highest priority for the Government, down 1.2 points on January, but up on the 14.4 percent who cited it this time last year.