Farm confidence rises but concern about compliance costs

Farm confidence rises but concern about compliance costs runs deep

Farmers are feeling slightly more positive than they were six months ago but very few believe general economic conditions will improve in the year ahead, the Federated Farmers Mid-Season Farm Confidence Survey shows.

"Higher commodity prices are boosting farm incomes and there has been a slight rise in profitability expectations over the next 12 months. However, concern about regulation and compliance costs is unabated since our July survey," Feds economics and commerce spokesperson Andrew Hoggard said.

Nearly 1,500 farmers responded to the January survey conducted by Research First, and just on 46% of them expected economic conditions to worsen over the next 12 months. That’s a 5 percentage point decrease on the July survey finding and the first positive change in forward-looking expectations since that benchmark peaked in July 2017.

However, there was no change in the very small proportion of farmers who expected conditions to improve (4%). Just over 46% expected no change in economic conditions (up five percentage points).

"That negative sentiment, albeit slightly improved, is consistent with the findings of other recent business confidence surveys," Andrew said.

Dairy farmers are the least pessimistic about economic conditions ahead but are still in negative territory, while arable farmers are the most pessimistic.

Compared to July last year, the proportion of farmers expecting their profitability to improve is up three points to 24%, and those expecting it to worsen is down 4 points to 21%.

"There’s a bit of buoyancy over sustained strong commodity prices generally and there’s a noticeable 9-point increase in the number of farmers who expect to reduce their debt over the next 12 months - no doubt in part due to the squeeze coming from banks," Andrew said.

The survey showed arable farmers had the highest proportion making a loss and the lowest proportion making a profit. These cropping farmers were by far the most pessimistic about profitability for the rest of 2020.

Somewhat perversely, arable farmers were the most optimistic about increasing production in 2020 (34% expect to increase production and 56% to maintain it - a 2.4-point net rise) while dairy farmers were more pessimistic (19.5% anticipate increasing production, 65.5% expect to maintain it - a 15.6 point drop on the July 2019 net score).

The January survey showed regulation and compliance costs, especially in the environmental space which will likely impact farm production and the cost of doing business, remains the single greatest concern for farmers. Just over 20% of respondents selected it as their No. 1 concern.

Climate change policy and the ETS came in as the second greatest concern (17%) and in third place was a new worry - freshwater policy (11%).

"Everyone in the agricultural sector is wondering where the government is going to go with its final decisions on standards for protecting waterways. We’ve voiced our concerns loud and strong that if the initial impractical proposals floated last year are not tempered with a more targeted and practical approach, pastoral farming will become uneconomic in some area," Andrew said.

Full copy of the survey report here - https://www.fedfarm.org.nz/FFPublic/Farm_Confidence_Survey/Mid-season_Farm_Confidence_Survey_January_2020.aspx

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