Slight rise in farmer confidence

The most pessimistic are sheep and beef farmers about their own farming operations since early...
The most pessimistic are sheep and beef farmers about their own farming operations since early 2017; pictured, Hereford cattle at Waikaka Station. Photo: Paterson Family
New Zealand farmer confidence increased slightly in the first quarter of 2019 - but more of the country's farmers remain pessimistic than optimistic, Rabobank's rural confidence survey has shown.

Concern over government policy was the major reason given by those expecting conditions to deteriorate, while rising commodity prices were the key reason cited by farmers expecting the agricultural economy to improve.

Dairy farmers were significantly more positive about the prospects for the broader agricultural sector than in late 2018 but sheep and beef farmers and horticulturists were less confident.

In addition to farmer concerns over signalled upcoming policy changes in relation to their future greenhouse gas obligations, and further freshwater reforms, the recent recommendations from the government's tax working group were also likely to be playing on farmers' minds, Rabobank New Zealand general manager for country banking Hayley Gourley said.

``In particular, farmers would be concerned by the group's recommendations that a capital gains tax be applied to farmland as well as new taxes introduced for fertiliser and water pollution,'' she said.

It was the most pessimistic sheep and beef farmers had been about their own farming operations since early 2017.

That fall in confidence was likely to be, in part, driven by concerns about how ongoing Brexit uncertainties, and reports of a slowing Chinese economy, would affect future demand from those key offshore markets, Ms Gourley said.

ASB's latest Farmshed Economics report said lamb prices looked like they had bottomed out at about $6.80kg.

Prices fell more than the bank expected over the beginning of 2019, but given the record highs reached in 2018, that was still a strong end to summer. Prices in the new season were expected to peak in the high $7 range.

Tight supply conditions that boosted last year's prices looked set to continue.

Demand remained strong in the US and firm in China, whereas traditional markets like the UK and EU continued to lose importance, the report said.

The main risk to that outlook was the performance of the Chinese economy.

The 2019-20 dairy season was shaping up strongly. The global dairy market was tight as globally supply was, on the whole, soft. Demand, particularly from Asia, including China, remained firm.

Beef prices were ``roughly middle of the road'' and, over the remainder of the year, prices were expected to track around that middle ground.

Global supply was growing but at a moderate pace. Meanwhile, demand growth was modest but still firm enough to match the pace of supply growth. In particular, Chinese beef demand continued to grow strongly.

The ANZ world commodity price index pushed up 1.4% in March, continuing the positive trend since the beginning of the year. Dairy again provided the largest price lift.

The NZD index also lifted 1.4% in March as there was little change in the average exchange rates across the month despite exchange rate volatility within the month, ANZ agriculture economist Susan Kilsby said.


 

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