High dollar knocks farmer confidence

Tough spring weather conditions and a rising NZ dollar were the reasons given for a fall in farmer confidence in the Rabobank quarterly survey.

Those farmers seriously affected by the tough spring conditions will have a rough year with some losses of such a scale it will be a couple of years before profits return.

But for lamb producers, a world wide shortage and NZ shortfall, and an exchange rate that is slightly ahead of the UK pound but behind the Euro, prospects may not be as low as B&LNZ predicted. Also it is interesting to note that the US currency is at the same level as last year but prices are much stronger.

Farmer confidence is often driven by feed supplies, and for most areas of NZ, La Nina brings wetter than average seasons, so maybe with commodity prices high, and wool coming back from the dead, confidence could pick up in the next quarter.

The high NZ dollar, coupled with tough spring weather conditions, has caused a dip in farmer confidence for the first time in more than a year.This follows four consecutive quarterly lifts in confidence and contrasts typical 'spring highs' in farm confidence seen in previous years. The latest quarterly Rabobank Rural Confidence Survey shows net farmer confidence has fallen to 24 per cent from 30 per cent in the previous survey undertaken in July.

The survey found 37 per cent of farmers expected the agricultural economy to improve in the next 12 months, down from 41 per cent who held that view in the previous quarter. Those expecting conditions to worsen increased to 13 per cent, from 11 per cent previously.Rabobank general manager NZ  Ben Russell said overall farmer confidence had taken a knock from high currency levels and poor spring weather conditions in many regions.

While dairy producers remained the most optimistic of all New Zealand farmers, dairy sector confidence had declined - down from 54 per cent expecting conditions to improve in the previous survey to 42 per cent this quarter."Dairy farmers are also moderating their production expectations for the season as tough weather conditions for most of the country are impacting the usual steep rise in milk flows seen prior to the spring flush."

The rising New Zealand dollar was cited as a concern by 42 per cent of respondents expecting conditions to worsen, while 37 per cent said they had concerns about production after experiencing snow, storms and general poor weather.Of those farmers expecting the agricultural economy to improve, 62 per cent nominated higher commodity prices as a reason for their optimism, while 29 per cent were looking to buoyant offshore markets.

Sheep and beef farmer confidence had risen, with 38 per cent expecting an improvement in the agricultural economy, up from 34 per cent with this view last survey.The number of sheep and beef farmers expecting their own farm business performance to worsen had climbed to 25 per cent, up from 15 per cent previously."The overall lower expectations farmers had for the performance of their own businesses is also indicative of the reduced production expected for the season, especially among sheep farmers, from the snowstorms and poor weather experienced during lambing," Russell said.