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Despite the rural sector having performed strongly through a number of recent challenges, New Zealand farmer confidence – which was already at low levels overall – has plummeted further and now sits at an historical low, the latest Rabobank Rural Confidence Survey has found.
The fourth and final survey of 2022 — completed late last month — found farmer confidence was significantly down on the previous (September) quarter, with the net confidence reading slumping to -71 per cent, from -31 per cent previously.
The latest net confidence reading is the lowest in the 20-year history of the survey and far exceeds the previous low of -45 per cent recorded amid the dairy downturn in 2015. The latest survey found the number of farmers expecting conditions in the agricultural economy to improve in the coming 12 months had fallen to four per cent (from 12 per cent in the previous quarter) while the percentage expecting conditions to worsen rose to 75 per cent (up from 43 per cent). A total of 19 per cent were anticipating the agricultural economy to remain stable (down from 44 per cent previously).
Rabobank New Zealand CEO Todd Charteris said farmers from all the sectors were now significantly more pessimistic about the prospects for the broader agri economy with a cocktail of concerns weighing heavily on farmer sentiment.
“As with recent surveys, rising farm input costs and government policy were the two major reasons cited by farmers with a pessimistic outlook for the year ahead,” he said.
“But we have seen the order reverse this survey, with concern over government policy now the major source of apprehension for farmers, cited by 68 per cent (up from 58 per cent previously) while 51 per cent of farmers were worried about farm input costs (down from 71 per cent last quarter).”
Mr Charteris said the rise in concern over government policy was likely to be tied to the Government’s proposed framework for pricing agricultural emissions released in October.
“This proposal has caused significant angst among primary producers with many believing it unduly penalises farmers and the communities in which they live and work,” he said.
“One of the chief concerns was that the proposal did not fully recognise on-farm mitigants that have been put in place to sequester carbon. The Government’s subsequent announcement at Fieldays that it plans to revisit sequestration policy will have been welcome news for farmers, however, this announcement was made after the survey closed and is therefore not reflected in the results.”
In addition to concerns over government policy and farm input pricing, the survey found rising interest rates (cited by 25 per cent of pessimistic farmers) and falling commodity prices (21 per cent) were further sources of worry for farmers.
“Since the last survey, we’ve seen the official cash rate rise by 125 basis points which has increased interest costs and further squeezed farmer margins. Over this period, we’ve also seen agri commodity prices pull back as global markets react to growing recessionary fears,” he said.
“And all these factors have combined to drain farmer sentiment and leave it deep in the doldrums as we move towards the end of the year.”
Own farm business performance
The survey found farmers confidence in their own farm business performance has also dropped to a new record low, with the overall net reading of -53 per cent well below the previous low of -26 per cent recorded at the beginning of the Covid-19 pandemic (data on this measure was first collected in 2009).
Only seven per cent of farmers were expecting the performance of their own operation to improve in the year ahead, while 60 per cent of farmers were expecting their own farm business performance to deteriorate.
While dairy farmers and growers were markedly more pessimistic about their own operations, Mr Charteris said sheep and beef farmers recorded the biggest fall and the lowest net reading on this measure, dropping to a net reading of -68 per cent from -26 per cent previously.
“Only four per cent of sheep and beef farmers are expecting conditions in their own operations to improve, with 72 per cent expecting conditions to worsen,” he said.
“And again, this big fall in sentiment is likely to largely be attributable to the government’s emissions proposal which – according to the government’s own commentary – could lead to significant reductions in the net revenue and production for New Zealand sheep and beef farms.”
The survey found the net reading for growers’ confidence in their own farm business performance had fallen to -45 per cent, while the net reading among dairy farmers dropped to -47 per cent.
Farm Investment and viability
While it didn’t fall as drastically as the two farmer confidence measures, Mr Charteris said farm investment intentions were also back on last quarter and at a net record low.
“Only 12 per cent of farmers are now expecting to increase investment over the year ahead with 26 per cent planning to reduce investment. The remainder are expecting to keep investment the same,” he said.
“Although at net negative levels overall, horticulturalists now have the strongest investment intentions, while sheep and beef farmers continue to have the weakest.”
Despite the fragile sector confidence, the survey found the vast majority of those surveyed viewed their operations as viable.
“We did see a lift from last quarter in the number of farmers who now believe their operation is unviable, but close to 95 per cent of farmers continue to have faith in the long-term viability of their operations,” 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.