8 September 2004

Rural confidence has continued to rise as international commodity prices push up farm-gate returns, according to the latest bi-monthly AC Nielsen/Rabobank Rural Confidence Survey.

The survey found almost 90 per cent of farmers now expect the rural sector to improve or stay the same in the coming 12 months, up from 60 per cent in the last survey. This is despite the spectre of rising interest rates and farm input costs. More also plan to increase their current levels of investment in stock, plant and land.

Rabobank general manager Doug Crombie says the survey, conducted in June/July, shows a significant increase in the number of farmers expecting conditions to improve.

"After what has been a good year for farming, this increase is understandable" Mr Crombie says.

"In fact it is somewhat surprising that it has taken so long for farmer outlook to reach this level, especially with the rural confidence index [farmers who expect conditions to improve less those with a pessimistic outlook] positive for the first time since November 2001."

But the real indicator of farmer confidence in their industry is their level of investment back into their business, Mr Crombie says.

Over 90 per cent of farmers expect to increase or maintain investment at current levels in the next year.

"There are a number of external issues that are having a positive impact on farmer investment intentions," Mr Crombie says. "Although we have seen the dollar rise in the past 12 months it appears to have stabilised. And the global supply and demand indicators are that commodity returns should maintain their current levels.

"This is a real positive to take out of the survey, and indicates that at current prices and productivity levels farmers are receiving a satisfactory return on their investment."

The survey shows a significant increase in the number of farmers expecting interest rates to rise in the next year. Recent announcements from the Reserve Bank have 92 per cent of farmers bracing themselves for further interest rate rises.

"Rising interest rates have been well signalled which has allowed farmers to factor them into their budgets and plans, which has minimised what may have been seen as a major negative", Mr Crombie says.

The ACNielsen/Rabobank Rural Confidence Survey is the first survey of its type in New Zealand, and uses ACNielsen's 1000-strong panel of farmers across the country. The next results will be released in October 2004.

For further information, please email wellington.confidence.survey@rabobank.com.