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Farmers stay split on prospects for the year ahead as growing range of concerns take edge off positive market conditions

Results at a Glance:

  • New Zealand farmer confidence dipped fractionally lower in the latest quarter and has now returned to net negative territory.
  • Despite the small drop in sentiment, there remains a relatively even split of farmers expecting the agricultural economy to improve in the coming 12 months and those expecting it to worsen.
  • Strong demand, rising commodity prices and positive overseas markets were the key factors cited by farmers with an optimistic outlook, while a host of issues – including government policy, rising input costs, labour shortages and the fallout from the Russia-Ukraine conflict – were concerning farmers with a negative outlook.
  • Farmers’ expectations for their own farm business performance were slightly up, led by a lift in confidence among horticulturalists.
  • Investment intentions across the sector were marginally higher with dairy farmers now holding the strongest investment intent.

Rabobank New Zealand CEO Todd Charteris
Rabobank New Zealand CEO Todd Charteris

New Zealand’s primary producers remain divided on the prospects for the agricultural economy in the year ahead, with a growing range of farmer concerns weighing on farmer sentiment, despite strong prices and demand, the first Rabobank Rural Confidence survey of the year has found.

The survey — completed earlier this month — found net farmer confidence was fractionally down from last quarter, with the net reading dropping to negative three per cent, from positive one per cent recorded in December.

The survey found the number of farmers expecting conditions in the agricultural economy to improve in the coming 12 months had fallen to 24 per cent (down from 28 per cent last quarter) while the percentage of farmers expecting conditions to worsen remained unchanged at 27 per cent. The number of farmers expecting the performance of the agricultural economy to stay the same rose to 46 per cent (from 43 per cent previously).

Rabobank New Zealand CEO Todd Charteris said the result marks the third consecutive survey where farmer sentiment has been ‘split down the middle’ with a relatively even proportion of farmers expecting the performance of the agri economy to improve and those expecting it to worsen.

“The supply and demand fundamentals for New Zealand’s key agricultural commodities remain strong, and primary producers are currently enjoying an extended run of elevated commodity pricing,” he said.

“However, countering the positive sentiment generated by this are a whole host of factors creating anxiety among farmers including government policy, rising input costs and shipping disruptions.

“Since the last survey in late 2021, this list of concerns has only grown with the rapid rise in Covid-19 case numbers across the country adding to the already significant labour challenges facing the sector. We’ve also seen Russia’s invasion of Ukraine disrupt global agricultural commodity markets and create a geopolitical environment that has markedly increased New Zealand’s trade risk.

“And with all these factors amplifying uncertainty and clouding the outlook for the sector, it’s understandable there is little consensus among farmers as to how the broader agricultural economy will fare over the next 12 months.”

The survey found that among farmers with an optimistic outlook, the most cited reasons for holding a positive view were demand (45 per cent), overseas markets (41 per cent) and rising commodity prices (40 per cent).

Pessimistic farmers identified government policies (59 per cent) and rising input costs (36 per cent) as key reasons for expecting the agri economy to worsen. ‘Other’ reasons also featured prominently (56 per cent) with the related verbatim responses identifying Covid-19, labour shortages and the war in Ukraine as the three most prominent concerns cited under this heading.

Climate change concerns

Mr Charteris said the latest survey included additional questions related to farmer concerns about the future impact of government climate change policy on their businesses.

“Late last year, He Waka Eke Noa – the primary sector climate action partnership – released a discussion document which put forward two options for measuring and pricing agricultural emissions. Farmer consultation meetings on these options have been taking place over recent months and industry participants should now have a good idea of the choices available to them,” he said.

“This improved understanding of the options appears to have done little to diminish farmers’ apprehension however, with the latest survey finding 68 per cent of farmers were ‘very concerned’ about future climate change policy. This compares to the 61 per cent of farmers who indicated they were ‘very concerned’ about climate change policy when this question was last asked in late 2020.”

Own farm business performance

The survey found farmers’ confidence in their own farm business performance was marginally up on last quarter with 30 per cent now expecting their business performance to improve in the next 12 months (28 per cent last quarter), 19 per cent expecting business performance to worsen (22 per cent previously) and 50 per cent expecting it to stay the same (down from 54 per cent).

“Dairy farmers’ confidence lifted on this measure, and they remain the most confident of all the sector groups,” Mr Charteris said.

“This rise comes off the back of the largely favourable GDT results during late 2021 and early 2022 which resulted in Fonterra bumping up its milk price forecast range for the 21/22 season to $9.30 – $9.90 per kg of milk solids in late February.”

The survey found horticulturalists’ confidence in their own business performance was also up while sheep and beef farmers were now less positive about the prospects for their own operations.

“Growers recorded an historically-low result on this measure last quarter, but their confidence bounced back this quarter. Key factors in this improved sentiment are likely to be the government’s announcement earlier this month on the opening of the border — which will improve access to overseas labour – and the continued good returns for sun gold kiwifruit and other horticultural exports,” he said.

“Unfortunately, we’ve seen sheep and beef farmer confidence in their own businesses heading in the opposite direction. Since the turn of the year, New Zealand’s meat processors have been hit by a host of issues which have led to significant wait times to get stock slaughtered. And this has contributed to sheep and beef farmers’ confidence in their own businesses now dropping below that of their dairy and horticultural counterparts.”

Farm Investment

The survey found farm business investment intentions were marginally higher than in the last quarter, with 34 per cent of farmers now planning to increase investment over the next year and only 11 per cent expecting investment to decrease.

“Dairy farmers now hold the strongest investment intentions of all sector groups with 45 per cent looking to increase investment in the year ahead,” Mr Charteris said.

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 - March 2021

Rabobank New Zealand is a part of the global Rabobank Group, the world’s leading specialist in food and agribusiness banking. Rabobank has more than 120 years’ experience providing customized banking and finance solutions to businesses involved in all aspects of food and agribusiness. Rabobank is structured as a cooperative and operates in 36 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 30 offices throughout New Zealand.

Media contacts:

David Johnston
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Rabobank New Zealand
Phone: 04 819 2711 or 027 477 8153

Denise Shaw
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Rabobank Australia & New Zealand 
Phone: +612 8115 2744 or +61 2 439 603 525