Farmgate prices rise as farmers rebuild confidence
Sheep and beef farmers are cautiously optimistic as farmgate prices continue to firm.
The final survey for 2013 showed a slight climb in confidence from the already high levels witnessed last quarter.
The most significant improvement was among horticultural producers, encouraged by an increase in prices, which has been underpinned by strong global demand in key export markets.
Confidence among dairy producers held steady, while beef and sheep farmer sentiment also remained at similar levels to the previous survey.
Overall, only 5% of New Zealand farmers had a negative outlook on the year ahead, slightly less than the 6% with that view in the previous survey, with 36% expecting conditions to remain stable.
Rabobank New Zealand chief executive Ben Russell says improving farm gate prices for most agricultural producers were the key contributors to continued high confidence levels.
Commodity prices were identified as the primary driver of confidence by farmers this survey.
Of those New Zealand farmers with a positive outlook, 57% cited commodity prices as reason for optimism (up from 44 per cent last survey).
The state of overseas markets and economies was also cause for positivity, nominated by 37% (up from 20% previously).
Interestingly, Russell says, while overall confidence in the rural economy had climbed, farmers' expectations for the performance of their own individual businesses had softened.
A total of 55% of farmers still expected improved business performance in the next 12 months, however this was lower than the 57% with that expectation in the previous survey.
Russell says this slight reduction had been driven by a drop off in the proportion of dairy farmers expecting improved business performance – from 72% last survey to 62%.
"This likely reflects a view that production conditions and pricing can't get much better than they are currently, and so therefore will be similar or not as good in the coming 12 months," he says. "This aligns with Rabobank's view that we are likely to see some softening of record high dairy commodity prices over the next year."
Farmers' investment intentions remained relatively stable, with a consistent 94% of producers expecting to either increase or maintain the level of investment in their farm business this survey and last.
New Zealand farmers' assessment of their own business viability had eased slightly, after a strengthening in this measure that had been witnessed in the previous survey. A total of 67% considered their business viable or easily viable, down marginally from 68%.
Russell says this easing in the viability index was most apparent among sheep and beef farmers, where 6% had moved from easily viable/viable to the just viable category.
"The gap in self-assessed viability between the dairy and sheep and beef sectors continues to be very large," he says.
