Federated Farmers confidence survey

"The results make for ugly reading and illustrates that the recession's full bite is yet to come," says Don Nicolson, President of Federated Farmers. "Coming off the back of the Ministry of Agriculture and Forestry's latest situation report, farmers remain deeply pessimistic about the state of the general economy and their own prospects for the next 12 months. "A net 45 percent of farmers believe the economy will deteriorate further casting doubt on those calling the recession's end.  This has major ramifications for Thursday's Monetary Policy Statement and Official Cash Rate decision. "While Dr Bollard seems set to keep interest rates on hold, this survey and the concussive effect of low dairy payouts for the foreseeable future, raises the spectre of an "˜L' shaped recession where the economy will bump along the bottom for a number of quarters. "Federated Farmers economists believe urban New Zealand is yet to feel the full effect of the slowdown striking the provincial economy.  "Over three quarters of dairy farmers expect business profits to be lower.  A net 36 percent of all farmers expect to reduce spending over the coming 12 months, again led by dairy. "While export prospects and the outlook for agriculture over the medium term remain excellent, returns for the past season and the forthcoming season will be down. "A persistently high kiwi dollar may further erode the forecast payout for Fonterra suppliers as well as what meat and fibre farmers will earn. "It's important to remember that this season's revenue is yet to come into the New Zealand economy.  The effect of this is yet to translate into the general economy, which is why we counsel against predicting the recession's end. "One encouraging result of the Federated Farmers Farm Confidence Survey is that a majority of New Zealand farms are well managed financially.  While the level of farm debt will rise, it's still represents just 15 percent of the total private debt owed by New Zealanders. "While the survey found 45 percent of dairy farmers expected to increase their borrowings, a narrow majority of dairy farmers didn't. Indeed, almost 74 percent of sheep and beef farmers and almost 65 percent of grains farmers expect to see their debt levels flat line or reduce. "It underscores why Federated Farmers wants all of the banks and non-bank financial institutions to continue their support of farming.  At the end of the day when you produce something the world needs you can't go wrong," Mr Nicolson concluded.