Fed Farmers survey reveals 'an incredibly positive result' around farm profitability, but nearly 30% of farmers expect conditions to worsen

Content supplied by Federated Farmers

Profitability is the highest it’s been in a decade, but farmers are worried about whether the good times will hold.

Federated Farmers’ latest Confidence Survey shows 72% of farmers are making a profit, with fewer than one in 20 making a loss.

"That’s an incredibly positive result and the highest since we started asking about profitability back in 2016," Federated Farmers president Colin Hurst says.

"High interest rates, low commodity prices and sky-high input costs were making it really hard for farmers to earn a living just a few years ago.

"Dairy, sheep and beef farmers are now getting strong returns again, meaning farming has been one of the main bright spots in an otherwise sluggish New Zealand economy."

The July survey of 634 farms found farmers are feeling confident about wider economic conditions right now.

However, confidence about the next 12 months moved sharply in the opposite direction.

Nearly 30% of farmers expect conditions to worsen, compared with only 12% expecting improvement.

"Most of that concern about the year ahead is coming from dairy farmers, with 39% expecting a downturn versus 18% of meat and wool farmers," Hurst says.

"Nearly 8% ticked ‘don’t know’, suggesting genuine uncertainty rather than settled pessimism."

When asked to name their top concerns, the reasons for declining forward confidence are clear, Hurst says.

"Farmers who answered our survey describe a sector that’s currently well paid at the farmgate - arable farms a notable exception.

"But even though returns are good, they’re feeling squeezed by high costs, over-regulated, and politically anxious."

Farmers’ top three concerns are rising input costs/on-farm inflation (33%), the election and domestic politics (30%) and regulation, compliance and red tape (23%).

"In farmers’ written comments, we can see a recurring theme that fuel, fertiliser, freight, insurance and other costs are ratcheting up faster than returns.

"They have limited ability to pass those costs on, so that means profit margins could be eroded."

Worries about commodity prices and weather, such as a potential El Niño-driven drought, are well back at 12% and 11% respectively.

Despite net pessimism about the year ahead, more than half of the survey respondents plan to increase on-farm spending, and many expect to lift production.

Two in five farms expect to reduce debt against one in nine expecting they’ll have to borrow more.

"Set against rising profitability, it appears our sector is investing and repairing balance sheets while the cash flow is there," Hurst says.

Unfortunately, while for dairy and meat and wool farmers many of the indicators are holding or positive, that’s not the case for arable farmers.

The arable sector is the only group that expects to have to increase debt rather than pay it down, and the only group negative on current profitability at net -2.6%.

"It’s incredibly concerning that only one in five arable farmers report making a profit, and nearly one in four report a loss," Hurst says.

"The current conditions lifting the pastoral sector are not reaching our cropping farmers and that’s bad news for all of us.

"Arable farmers supply the platform of seeds, grains and feed required to run the nation’s multi-billion dollar livestock industry."

Hurst says for political parties wondering what farmers want most from the Government, the clearest single instruction is to finish what has been started.

"The Government has done a good job of slashing red tape and trying to get Wellington out of farming.

"Even so, nearly a third of farmers say cutting regulation and compliance costs is their top priority for the Government.

"What we need is for the Resource Management Act reform to be completed, alongside simplifying consents and audits, and reducing council powers.

"Our election platform lays out a five-point plan to double farm productivity, cut costs and improve the environment, and we encourage all parties to take it on board."

Other key findings from the July survey:

Current profitability has risen at every survey January and July survey since a July 2024 trough. In the 2026 July survey, fewer than one in 20 farms report making a loss, compared with roughly one in three at the depth of the 2022-2024 downturn.

Dairy farmers report strong current profitability, at a net +74.5, with 77% making a profit. Yet they are by far the most pessimistic about the year ahead: 39% expect economic conditions to worsen and 40% expect their own profitability to decline, against 18% and 14% among meat & wool farmers.

Asked whether pressures such as economic conditions, weather, or government policy and regulation are affecting their mental health and wellbeing, just under one-third said yes, with a further 8% unsure. When first asked in January 2023, at the depth of the downturn, the figure was just over 70%.

You can find the full report here.