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Farmer confidence continues upward surge

New Zealand farmer sentiment continues to surge higher, rising strongly for the second consecutive quarter, the first Rabobank Rural Confidence Survey of 2024 has found. While farmer confidence does remain low overall – with more farmers expecting the performance of the broader agri economy to worsen in the coming year than those expecting it to improve – it is now markedly higher than in September last year when it slumped to its lowest reading in the survey’s 20-year history.

The latest survey – completed earlier this month – found farmer confidence in the agri economy was up to a net reading of -16 per cent from -47 per cent previously. The survey found 38 per cent of farmers were expecting conditions in the broader agricultural economy to worsen over the next 12 months (down from 58 per cent last quarter) with 22 per cent expecting conditions to improve (from 11 per cent previously). The remaining 39 per cent expected conditions to stay the same (29 per cent previously).

Rabobank CEO Todd Charteris said it was pleasing to see farmer confidence continuing to move in the right direction.

Results at a glance

– Farmer confidence in the broader agri economy has risen strongly for the second consecutive quarter but remains at low levels overall.

– Government policy (28 per cent) and rising commodity prices (20 per cent) emerged as the major reasons for farmer optimism in the latest survey, while rising input prices (63 per cent) and falling commodity prices (45 per cent) continue to be the major concerns among those with a negative outlook.

– Farmers’ confidence in their own farm business performance also rose strongly across all sector groupings. Growers continue to be the most optimistic about the year ahead for their own businesses and sheep and beef farmers the most pessimistic.

– The number of farmers self-assessing their own farm business as unviable increased from last quarter and now sits at nine per cent (six per cent previously).

– Farm investment intentions remain relatively unchanged from last quarter with the majority of farmers expecting their investment levels to remain the same as the previous 12 months.

“Confidence is still well back on where we’d like to see it, but it is encouraging to see overall sentiment improving.”

Among farmers with an optimistic outlook, Mr Charteris said, government policy was the major factor cited for holding this view (nominated by 28 per cent). 

“While a smaller percentage of farmers credited government policy as a reason for optimism than in last quarter, it does seem clear that primary producers are more comfortable with the direction of government policy under the new coalition government than they had been under the previous administration,” he said.

“Other factors that came through in the survey as reasons for optimism included rising commodity prices (20 per cent) and overseas markets / economies (17 per cent).”  Among those expecting conditions to worsen, the survey found rising input costs (63 per cent) continues to be the major source of farmer concern.

“Since our last survey in December last year, we’ve seen prices for key farm inputs remain stubbornly high. We’ve also seen an escalation of tensions in the Red Sea region which has the potential to impact trade logistics and push prices for imported goods even higher,” Mr Charteris said.

“So, it’s therefore not surprising that farm input costs continue to top the list of farmer worries.”

Falling commodity prices (45 per cent) and rising interest rates (42 per cent) were the next most significant concerns among primary producers with a pessimistic outlook. Own farm business performance

The survey found farmers’ expectations for their own farm business operations were also higher than last quarter with the net reading lifting to – nine per cent from -31 per cent previously. Mr Charteris said farmers across all sectors were now more positive about the prospects for their own farm businesses with horticulturalists continuing to be the most optimistic and sheep and beef farmers the least.

“Growers’ net reading on this measure rose to +22 per cent and they continue to remain upbeat about the year ahead off the back of a strong season for most horticultural products and robust overseas demand for their products,” he said.

“Dairy farmers are also now considerably more positive than last quarter (up to a net reading of + five per cent from -20 per cent previously) with this largely attributable to  Fonterra lifting its farm gate milk price for the 23/24 season to a mid-point of $7.80 kg/MS in February – a move which came off the back of six consecutive GDT event price lifts across late 2023 and early 2024.

“Expectations for their own businesses were significantly higher among sheep and beef farmers too but, with sheepmeat pricing continuing to underwhelm, the overall net reading remains low at -31 per cent (-62 per cent previously).

Viability and investment intentions

Mr Charteris said the major black spot in the most recent survey was the rise in the percentage of farmers self-assessing their own operation as unviable, with this number climbing to nine per cent.

“We did see this number lift as high as 12 per cent in quarter three last year before dropping back to six per cent last quarter. And while the general uplift in confidence registered in the survey is positive, the rise back up to nine per cent does illustrate just how difficult the 23/24 season has been,” he said.

The survey found investment intentions were broadly similar to last quarter with 16 per cent of farmers saying they would increase investment over the next 12 months and 29 per cent of farmers expecting investment to decrease. 

 

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