Farming Sector Remains Cautious - Rural Confidence

Farming Sector Remains Cautious

While farmers are not anticipating major improvements in the rural economy in the next 12 months, they expect the low interest rate environment to continue, according to the latest ACNielsen/Rabobank Rural Confidence Survey.

Showing little change from the last survey, the bi-monthly ACNielsen/Rabobank Rural Confidence Survey, taken in June/July, indicates that farmers expect current economic conditions to continue into the next 12 months.

Half of the farmers surveyed expect their incomes to decrease next year and nearly half expect their costs to rise. The key measure of investment intentions remain steady and the majority expect interest rates to fall.

Rabobank managing director, Bryan Inch said income expectations remained the same as in the previous phase of the survey, and indicated a steadiness in farmer outlook.

“And although this may seem pessimistic, the outlook is significantly better than it was this time last year” he said.

The survey shows farmers are also expecting to pay more for farm inputs. Nearly half expect farm input costs to increase, which is down slightly from the June survey (56 per-cent).

Mr Inch said combination of lower incomes and higher costs will likely see farmers putting away their cheque books and watching expenditure carefully.

“Farmers are used to the challenges faced in their business though and I expect most will manage until we reach the next upswing” Mr Inch said.

Farmer expectations of interest rates increasing are at the lowest levels since the survey began in February 2000, with less than 10 per-cent expecting rates to rise.

“With debt servicing rates at historically low levels there is an opportunity to take control of at least one major cost, by fixing interest rates” said Bryan Inch.

The relatively high New Zealand dollar has been cited as a major contributor to both the lower farm incomes and low interest rates.

Despite the overall outlook for the rural economy, farmers still plan to keep investing in their properties, with over three-quarters indicating they will maintain or increase investment in stock, plant and land.

Mr Inch said this planned investment was important. “With incomes decreasing it is essential that productive inputs and maintenance levels are maintained. A lot of money has been reinvested back into farms over the last couple of years, and production gains will be one way to help offset any negative impacts of a rising dollar or falling product prices”.

- The ACNielsen/Rabobank Rural Confidence Survey is the first survey of its type in New Zealand, and uses ACNielsen’s 1000-strong panel of farmers across the country. The next results will be released in October 2003.

ENDS

ACNielsen Rabobank Rural Confidence Index

(Question: How well do you expect the Agricultural Economy generally will perform over the next 12 months?

(Rural Confidence Index = % saying "improve", minus % saying "get worse").

"Improve" minus "Get Worse" equals "Rural Confidence Index"
Dec-00 42% 8% 34%
Mar-01 32% 8% 24%
May-01 34% 7% 27%
Jul-01 30% 5% 25%
Sep-01 24% 13% 11%
Nov-01 21% 14% 7%
Feb-02 8% 32% -24%
Apr-02 7% 32% -25%
Jun-02 4% 52% -48%
Aug-02 1% 77% -76%
Oct-02 2% 64% -62%
Dec-02 7% 42% -35%
Feb-03 11% 33% -22%
Apr-03 4% 66% -62%
Jun-03 8% 45% -0.37
Aug-03 7% 51% -0.44

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