The latest Rabobank Rural Confidence Survey has found that farmers are more pessimistic about the broader agri economy’s prospects, despite improved confidence in the performance of their own operations.
After rising strongly in the previous two quarters, farmer confidence in the broader agri economy reversed course, falling to a net reading of -25% from -16% previously.
Conversely, farmers’ expectations for their own business performance improved, with the net reading climbing to -1% from -9% previously.
Rabobank CEO Todd Charteris called the survey a “mixed bag” of results.
“It’s obviously disappointing to see headline confidence fall, but there were several positives in the results, with the major plus being the uplift in farmers’ confidence in the performance of their own businesses.
“We generally do see the reading for farmers’ confidence in their own businesses sitting a little higher than for the broader agri economy, but the two measures do almost always move in the same direction, so it is a bit unusual to see them taking divergent paths this quarter.”
Charteris suspected that a possible reason might be farmer concerns about the prospects for New Zealand’s overall economy are feeding into pessimism about the prospects for the agri economy.
Among farmers with a pessimistic outlook on the agri economy, the survey found higher input prices (56%), lower commodity prices (40%) and rising interest rates (37%) were the three major reasons cited for holding this view.
Among those expecting conditions to improve, the report found, rising commodity prices was the major reason cited (by 36%), while government policies or intervention (24%) and increasing demand (23%) were the other major reasons identified.
The survey found farmers’ expectations for their own farm business operations were up across all sector groupings.
Sheep and beef farmers recorded the most significant upwards lift (rising from a net reading of -31% to -17%) on this measure, while the net scores rose from 5% to 10% for dairy farmers and from 23% to 26% for growers.
“Sentiment among sheep and beef farmers has been at dire levels over recent quarters.
So it is encouraging to see this creeping upwards with this likely to be largely attributable to the strong pricing outlook for beef over the months ahead,” Charteris said.
“It’s also good to see slight rises in confidence in their own businesses among dairy farmers and horticulturalists.
“Dairy farmers saw some healthy price rises at GDT auctions during May and early June, which will have put a bit more of a spring in their step, while horticulturalists continue to see good growing conditions that are helping to set them up for good returns.”
The survey found farm viability was marginally improved from last quarter.
“Last quarter we saw 9% of farmers self-assessing their operations as ‘unviable’, with this now dropping to 7%,” Charteris said.
“At the top end, we’ve also seen a small lift in the proportion of farmers assessing their businesses as ‘easily viable’ with this up to 16% this quarter from 14% in March.”
The net reading for farmer investment intentions also rose marginally on last quarter with 14% of farmers (16% previously) saying they intended to increase investment and 23% (29% previously) intending to decrease investment.
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