Farmer Confidence Dries Up

For immediate release.

31 January 2002

Farmer Confidence Dries Up

THE SUN may finally be shining but the outlook isn’t bright on the farm, according to latest results from New Zealand’s only specialist rural confidence survey.

Farm optimism has dropped to its lowest level since the survey started two years ago, while the number of farmers who say they will cut spending this year is now the highest recorded.

And one in four farmers expects to earn less in 2002.

This latest AC Nielsen/Rabobank Rural Confidence Survey was taken late December and shows dairy farmers in particular are much more pessimistic.

Weeks of wet weather late last year may well have dampened expectations among respondents. But product price warnings for our major primary sectors are the most likely source of the new mood, says Rabobank managing director Bryan Inch.

“We still see a fairly solid core of farmers who predict no change in the key business drivers of farm economic outlook, investment, gross income and interest rates.

“But on either side of that line the mood has clearly swung, we believe this is largely in response to the recent industry forecasts about product prices in the coming season.”

Just eight per cent of all farmers questioned now expect farming to perform better in the next 12 months. That’s down from 21 per cent in the November survey and 42 per cent a year ago. It is the lowest number recorded since the survey began January 2000.

Farmers expecting things to deteriorate have more than doubled since November – 32 per cent, up from 14 per cent.

Fifty-nine per cent of farmers predict no change, down slightly from 64 per cent.

“Dairy farmers show the biggest reversal,” Bryan Inch says. “Only eight per cent remain optimistic for improvement in the year ahead”. That is down from 24 per cent last survey, while 42 per cent expect things to worsen, (10 per cent.)

But this pessimism is fairly universal across all farm types, with just four per cent of beef farmers and nine per cent of sheep farmers remaining positive about the future, compared with nine per cent and 21 per cent respectively in November.

After two years of hardly any variation, latest farm spending figures show significant movement, Bryan Inch says.

“For the first time, the number of farmers who say they will reduce investment in the coming year has reached double figures – 11 per cent, up from eight per cent last survey, and five per cent two years ago.

“Those who plan more spending have dropped from 34 per cent, to 29 percent. That may not look much in itself, but it is the biggest shift since we started the survey. And in the context of the consistency in these figures until now, it’s worth watching.”

However, Bryan Inch says, over half the farmers in each sector surveyed – dairy, sheep, beef, mixed and crop – plan to maintain investment at current levels.

Farm income expectations have also reached their lowest levels since the survey started.

The number of all farmers who expect to earn more in the next twelve months is now 40 per cent, down from 53 per cent in November, and 72 per cent a year ago.

Those who predict income will drop, meantime, have reached 25 per cent, the highest recorded, and 10 per cent up from November.

“Once again we see a major shift in dairy outlook. The number of dairy farmers who expect higher earnings has virtually halved, from 64 per cent to 38 per cent, while those who say they will earn less has shot up from eight per cent to 30 per cent,” Bryan Inch says.

Thirty-four per cent of beef and 22 per cent of sheep farmers also now expect lower incomes this year.

Interest rate expectations have also changed, Bryan Inch says.

“More farmers (27 per cent versus 13 per cent) now believe rates will rise.”

Next results of the survey will be released in April.

ENDS

For further comment, and/or comparative data tables, please contact:

Bryan Inch Michael Hales Kate Crump
Managing Director Marketing Manager Agricultural Tracking Manager
Rabobank New Zealand Ltd Rabobank New Zealand Ltd AC Nielsen
Wellington Wellington Christchurch
04 462 5650 04 462 5650 03 326 5568
027 481 7429 027 484 3551 025 273 9800

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