Farmer confidence crashes, even before payout forecast cut

A survey of farming confidence conducted before Fonterra's recent payout forecast cut shows that farmers are much more pessimistic about 2009 because of the global financial crisis and falling commodity prices. The Rabobank/Nielsen Rural Confidence Survey found that 29% of respondents expected the agricultural economy to get worse over the next 12 months, up from 7% in the September survey. "Farmers are well aware that the pressure on consumer spending will impact demand for agricultural products in our export markets and that the effects of this will only be partially offset by the lower New Zealand dollar exchange rate," Rabobank General Manager for Rural New Zealand Ben Russell said. Respondents expecting the agricultural economy to get better totaled 26%, down from 59% previously. This means confidence has gone from a net 52% positive to a net 3% negative in one quarter, although this volatility is common and the net result has been in negative for most of the last six years. Of dairy farmers surveyed, 39% expected conditions to get worse, up from 4% previously. Those expecting it to get better were 13%, down from 49%. "International dairy commodity prices had fallen 25-35% since the last survey," Russell said. "While the weaker New Zealand dollar limited the price falls to between 5-15% in local currency terms, dairy farmers have recognised that the impact would flow through to the dairy payout," he said. Sheep and beef farmers were slightly more optimistic than their dairy counter-parts, with 30% expecting conditions to get worse (up from 5%) and 33% expecting them to improve (down from 67%). "While sheep and beef farmers were experiencing higher farm gate prices for their livestock this season, the benefits of tight supply availability would be tempered by tough economic conditions in key export markets," Russell said. For all farmers surveyed, 35% expected incomes to increase over the next 12 months, 32% expected them to be lower, while 32% expected them to remain the same. However the survey was completed by farmers before Fonterra cut its payout forecast from NZ$6.60 to NZ$6.00 on November 21, 2008. For dairy farmers, the income outlook was much more sombre with 47% expecting incomes to decline, up from 11%, while only 25% expected an increase in income, down from 62% in September. The Rabobank/Nielsen Rural Confidence Survey is conducted quarterly. An online panel of 358 farmers across New Zealand participated in the most recent survey.