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There is a sense of relief as two surveys show regional economic confidence rose in the three months ended March.
Farmer confidence has taken a ''significant jump'' in the first quarterly Rabobank rural confidence for the year. The survey, completed earlier this month, was released the same day as Fonterra dropped its dividend estimate range by 5c to between 20c and 30c to the disappointment of farmers.
The Westpac McDermott Miller regional economic confidence survey showed rural regions and smaller centres generally showing the biggest gains. Confidence in the main centres was mixed.
Westpac senior economist Michael Gordon said there was a sense rural regions were bracing themselves for some ''particularly tough times'' in the previous survey. At the time, Fonterra's farmgate milk price for the current season was expected to fall below $5 per kilogram of milksolids compared with the record $8.40 paid in the previous season.
''Three months on, and while conditions have indeed become tough for the farming sector, they're perhaps not as bad as feared. A pick up in world dairy prices has raised hopes for a better result next season and very high prices for beef in the US market have provided some offset.''
While dry weather had prevailed across most of the country until recently, the overall impact had not been as severe as in other recent droughts, Mr Gordon said.
Rabobank New Zealand chief executive Ben Russell said there had been a ''considerable turnaround'' in dairy farmer confidence.
Overall confidence in the outlook for the agricultural economy had turned around from a net 15% position in late 2014 to 14%.
A total of 45% of dairy producers reported a confident outlook on the 12 months ahead, which was up from 21% with that view last survey, while 19% expected conditions to worsen, down from 45%.
The upswing in sentiment was likely to have been driven by the expectation that global dairy commodity prices had hit the bottom of the current trough through December and January and were showing signs of improvement.
While the bank's view was that the sector had passed through the worst for dairy market fundamentals, Mr Russell cautioned a more significant recovery was still some way off.
''Our view is that prices will remain challenged as the global dairy market looks to deliver the signal to restrain production growth.
That said, as we progress further into 2015, we expect to see a tightening in the market which will generate modest upward price pressure in the second half of the year,'' he said.
Of all New Zealand farmers expecting the economy to improve, 56% nominated rising commodity prices as reason for their optimism. Of those expecting the economic outlook to worsen, drought was the primary concern.
While sheep and beef producers reported similar levels of overall confidence to the previous survey, they were considerably more bearish about the expectations of their own farm operations.
After registering a spike the previous survey, only 21% now expected their farm business to perform better over the next 12 months, down from 75% last quarter.
The deterioration in outlook was likely due to the dry weather conditions that had been impacting many regions and had forced livestock farmers into destocking at lower prices than had originally been expected for the season, he said.
Rabobank's latest agribusiness monthly showed New Zealand lamb slaughter in January increased 36%, or about 800,000 head, year on year. February and March were also likely to be well ahead of last year.
Despite the increase in slaughter, sheepmeat exports in January fell 10% year on year, to 35,182 tonnes. The fall was underpinned by a decline in exports to China, which was reportedly driven by higher domestic Chinese supply.
Regional economic confidence rose slightly in March but remains well below its long term average.
While the region has seen reasonable jobs growth, it was not enough to prevent a rise in the unemployment rate over the second half of 2014.
Queenstown has been the star performer within the region, with strong growth in tourist spending and a substantial lift in house prices since the election.
Southland had by far the largest increase in regional economic confidence, although the 32 point rise was still not quite enough to undo the December quarter plunge.
Unlike the other major dairying regions, drought has not been a significant threat for Southland which might help to explain the relatively large rebound in economic confidence in this quarter.
Not surprisingly, Canterbury remains the most confident region by a wide margin, although it only eked out a small gain in the March quarter and is still down on a year ago.
The post quake rebuild in Christchurch is still in its growth phase, driving low unemployment and strong consumer spending growth.
The region has been affected by the changing fortunes of the dairying sector. Milk prices have fallen sharply and the drought had its most severe impact in South Canterbury.