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Strong commodity price outlook inches farmer confidence higher

Results at a Glance

  • New Zealand farmer confidence rose for the third consecutive quarter – albeit modestly – and remains in net positive territory overall, with more farmers optimistic than pessimistic about the year ahead.
  • Rising commodity prices were the key reason for optimism cited by farmers with a positive outlook for the agricultural economy.
  • Government policy was the major concern among farmers with a negative outlook, while labour shortages are a further source of concern.
  • Farmers’ expectations of their own farm business performance were up on last quarter, led by a strong jump in confidence among sheep and beef farmers.
  • Investment intentions were marginally back on the last quarter but remain robust, with more farmers expecting to increase investment than those expecting it to decrease.

Rabobank New Zealand CEO Todd Charteris

Rabobank New Zealand CEO Todd Charteris

The strong pricing outlook for New Zealand’s key agricultural products has driven a third consecutive lift in New Zealand farmer confidence, the latest Rabobank Rural Confidence Survey of the year has found.

After returning to net positive territory in the first quarter of 2021 – with more farmers optimistic than pessimistic in their outlook – following 10 consecutive surveys at negative levels, farmer confidence continued its ascent with the overall reading inching upwards to +13 per cent, from +10 per cent previously.

The latest survey – completed earlier this month – found the number of farmers expecting the rural economy to improve in the next 12 months increased to 32 per cent (from 29 per cent last quarter), while the number expecting the rural economy to worsen remained at 19 per cent. A total of 50 per cent were expecting similar conditions (down from 53 per cent).

 Rabobank New Zealand CEO Todd Charteris, said the small improvement in farmer sentiment was being fuelled by a strong commodity pricing outlook, despite increasing concerns about aspects of government policy and the impact of labour shortages on the rural sector.

“Farmers are now marginally more positive about the prospects for the agricultural economy in the coming 12 months. And the key reason for this is rising commodity prices, with this cited by well over half of those holding an optimistic view of the year ahead,” he said.

Mr Charteris said pricing for New Zealand’s key agricultural exports had held up well over recent months and prices were expected to remain strong moving into the second half of the year.

“Since the last survey in March, dairy farmers have been buoyed by continued strong Chinese demand for Oceania-origin dairy imports which has helped maintain pricing at elevated levels. In addition, we’ve seen Fonterra announce a strong opening season forecast for the 2021/22 season of $7.25 to $8.75 kg/MS, with a mid-point of $8,” he said.

“We’ve also seen the outlook for beef pricing improve as a result of reduced competition from Australia, while sheep meat exports are expected to remain firm over coming months due to expected ongoing strong demand from key markets.

“Likewise, returns for New Zealand’s horticultural products have stayed strong off the back of robust overseas demand. This is particularly the case for New Zealand kiwifruit, with Zespri reporting growth in customer demand across all markets as Covid-19 has driven consumers to seek out vitamin rich foods.”

Mr Charteris said the incremental lift in farmer sentiment came despite rising farmer concerns over government policy.

“Of the one in five farmers with a pessimistic view of the agricultural economy, 82 per cent cited government policy as a key reason for concern. And while we’ve seen government policy feature as the major concern for farmers across recent surveys, this percentage is an increase on recent quarters,” he said.

“There are several government policies which may be causing unease among farmers, however this spike is likely attributable to concerns linked to the recently-finalised advice from the Climate Change Commission which could have potentially significant implications for New Zealand land use and farming systems, including future reductions in total livestock numbers.”

Mr Charteris said worker shortages also remained a significant concern for farmers.

“Among pessimistic farmers, 50 per cent cited ‘other’ reasons for expecting the performance of the agri economy to worsen with labour shortages the most frequently mentioned factor in the corresponding verbatim responses,” he said.

“For the first time, we also asked all farmers additional questions in the survey about the impact of labour shortages on their business. In response to these, 40 per cent of farmers said they ‘have been’ or ‘will be’ impacted by labour shortages, with this figure rising to 64 per cent among horticulturalists.”

Worryingly, Mr Charteris said, farmers also indicated labour shortages were now a significantly bigger problem than 12 months ago.

“Only three per cent of farmers indicated the issue had improved since last year, with 43 per cent saying it had worsened,” he said.

“The responses to these questions reflect the conversations we’re having with our clients on this topic, and it’s clear industry leaders and government still have plenty of work to do to mitigate the strain of worker shortages.”

“Over recent months we’ve raised this issue with a range of government ministers and we’ll continue to highlight the feedback we’re getting from sector participants on this matter in our ongoing dialogue with government.”

Farm business performance

The survey found farmers’ expectations for their own farm business performance were up on the previous quarter, increasing to a net reading of +16 per cent from +seven per cent in the previous quarter.

A total of thirty-two per cent of farmers were expecting their own farm business performance to improve in the next 12 months (up from 26 per cent), 16 per cent were expecting conditions to worsen (down from 19 per cent) and 50 per cent were expecting conditions to remain the same (down from 53 per cent).

“Farmers had improved expectations of business performance across all sector groups, with sheep and beef farmers recording the biggest rise and dairy farmers recording the highest overall expectations of their business operations,” Mr Charteris said.

“Horticulturalists recorded a small lift on this measure, however, as with last survey, there were more growers expecting the performance of their farm business to deteriorate over the coming 12 months than those expecting it to improve.”

Farm Investment

The survey found farmers’ investment intentions were slightly lower than in the last quarter, falling to a net reading of +11 per cent from +13 per cent previously.

A total of 24 per cent of farmers were expecting to increase farm investment in the coming 12 months (down from 25 per cent) with 13 per cent intending to decrease investment (up from 12 per cent) and the remainder expecting to invest the same.

“This minor drop was driven by weaker investment intentions among dairy farmers and horticulturalists while sheep and beef farmers bucked the trend recording a small lift on this measure,” Mr Charteris said.

“Farmers’ investment intentions remain relatively robust and higher than they were at the same time last year, however this small fall is likely down to their inability to plan for the future with any certainty, due to a range of factors including Covid-19, labour challenges and government regulation.”

Conducted since 2003, the Rabobank Rural Confidence Survey is administered by independent research agency TNS, interviewing a panel of approximately 450 farmers each quarter.

Rural Confidence Survey June 2021


Rabobank New Zealand is a part of the global Rabobank Group, the world’s leading specialist in food and agribusiness banking. Rabobank has nearly 120 years’ experience providing customised banking and finance solutions to businesses involved in all aspects of food and agribusiness. Rabobank is structured as a cooperative and operates in 40 countries, servicing the needs of about 8.6 million clients worldwide through a network of close to 1000 offices and branches. Rabobank New Zealand is one of the country's leading agricultural lenders and a significant provider of business and corporate banking and financial services to the New Zealand food and agribusiness sector. The bank has 32 branches throughout New Zealand.


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