Confidence split seen in rural sector

A split industry is highlighted in the latest Federated Farmers' farm confidence survey, with confidence continuing to sink in the sheep, beef and grain sectors.

Although overall results seemed to indicate a modest improvement in the farming economy, the improvement in confidence since the start of the season masked a ''real split'' between dairy and the rest of pastoral agriculture, Federated Farmers' national president, Bruce Wills, said.

While it was encouraging dairy farmers were more positive than six months ago, the ongoing and deepening pessimism in the rest of the farming community was concerning, the report said.

Last July, dairy farmer confidence was, like that of all farmers, at a low ebb but improved commodity prices in the second half of 2012 saw upward revisions in payout forecasts.

Those revisions had driven big improvements in dairy farmer views on their own profitability and on the wider economy, ''albeit off very negative bases''.

More dairy farmers also expected to increase production and spending and there was only a small drop in those expecting to reduce debt.

In contrast, meat and fibre farmers had not enjoyed the benefits of improved world dairy commodity prices and the strong dollar had further eroded what they got for their products. Lamb prices were down about 35% on this time last year.

Meat and fibre farmers had become even more pessimistic about their profitability and were only slightly less negative than they were about the wider economy.

They were also less optimistic about production, partly due to weather concerns in areas such as Hawkes Bay, and more expected to reduce their spending. There had also been an increase in meat and fibre farmers expecting to increase debt.

Otago-Southland farmers were the most pessimistic about the general economy, yet the most optimistic when it came to expecting to increase production.

Mr Wills said the big issues of concern to farmers were the increasing cost of farming staples, including the cost of regulation and compliance, what they were getting paid for their products, and the high New Zealand dollar.

It underscored the need for the Government to focus its spending on those things that would increase production while simplifying and streamlining regulation.

''Tackling the high dollar starts not with a printing press, but by central and local government cutting back on borrowing. While some agriculture debt is about survival, government still has an entrenched `borrow and spend' culture that needs to change,'' Mr Wills said.

The recently announced Collaboration for Sustainable Growth programme for the red meat sector must deliver unity, he said.

Unless the industry adopted the $65 million initiative, it risked ''oblivion'' in the coming decades, ANZ said yesterday.

The bank, which is among 10 industry participants involved in the seven-year programme, said the initiative was critical to the sector's survival.

''The danger we face is that we are not alone in seeking to exploit the international market for red meat,'' managing director commercial and agri, Graham Turley, said.

''If we are serious about wanting to develop vibrant, globally dominant and highly profitable agricultural industries, we will need all stakeholders in the industry to work together to bring about change. If we don't get our act together, other countries will pass us in a matter of decades,'' he said.

The ANZ commodity price index rose 0.3% in January, its sixth consecutive monthly rise, lifting it to a 10-month high.

The series has risen 8% since last July but is still 14% below its record high in April 2011. Prices for seven commodities increased in January, with prices falling for three and unchanged for the remaining seven.

The largest upward contribution came via a 1.5% lift in forestry prices and 0.4% increase in dairy prices which was partially offset by lower prices for aluminium and meat.

The stronger New Zealand dollar resulted in a 0.5% drop in the NZD commodity price index, with NZD prices 10% lower than a year earlier.

The index has remained in a relatively tight range over the past five months. The NZD price of beef, dairy and aluminium had not fluctuated much over that period, but the NZD price of logs, lamb and seafood exports had slipped to their lowest in at least three years, ANZ economist Steve Edwards said.