Strong dairy prices and an improving outlook in the red meat sector have seen New Zealand farmer confidence hit a five-year high.
The latest Rabobank quarterly rural confidence survey showed farmers were increasingly optimistic about the outlook for both their own enterprises and the overall agricultural sector.
After a large rally in the previous quarter, confidence in the overall rural economy remained high, 54% of farmers expecting conditions to improve over the next 12 months and 6% expecting them to worsen.
Expectations of their own businesses had also climbed, 57% expecting their farm business performance to improve over the coming year, up from 55%, and only 5% expecting it to deteriorate, compared with 10% in the previous survey.
While spring was typically when farmer confidence was at its highest, favourable climatic conditions, combined with improving product returns across most agricultural sectors, had increased confidence even further this year, Rabobank New Zealand chief executive Ben Russell said.
Dairy farmer confidence remained at levels seen in the previous survey, in the wake of Fonterra's record milk price forecast and generally better than usual spring conditions lifting milk production.
Dr Russell cautioned it was likely dairy commodities prices would ease from their record high levels into 2014 and that was something that should be factored into producers' planning and budgets for next season.
Prices in the latest GlobalDairyTrade auction dropped 1.8% this week and were expected to ease further because of increasing supply.
Butter was down 7% and whole milk powder dropped 3.7%, while anhydrous milk fat lifted 6.9% and milk protein concentrate was up 4.6%. The index was now almost 11% below April's highs.
Domestically, milk production was estimated to be running a little under 5% ahead of last year and Fonterra had upped its forecast of product on offer through the GDT platform over the next 12 months, Westpac economists said.
For sheep and beef farmers, 56% were expecting the agricultural economy to improve in the next 12 months, up from 52%, while the number expecting their own farm business performance to improve had increased from 45% to 49%.
Improving commodity prices were buoying the red meat sector, with lower stock numbers - particularly less availability of lambs - contributing to the positive outlook, Dr Russell said. Widespread drought last season meant an estimated two million fewer lambs this spring. At the start of the new processing season, farm gate prices were 2% to 3% ahead of the previous year for lamb.
In its latest agribusiness update, Westpac said the growth outlook for lamb in key European markets was improving, albeit off a low base.
