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Source: ONE News -
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Dairy farmers coping with the forecast downturn in payouts this season remain the most pessimistic rural sector, but confidence levels for meat and wool farmers are rapidly spiralling downwards as well.
While the dairy farmers still have the lowest confidence levels in the latest quarterly Rabobank survey on Monday, sheep and beef farmers racked up the biggest drop in confidence levels.
It was the third consecutive survey to show waning business confidence among farmers.
Now 44% of the meat and wool farmers are feeling pessimistic about their businesses, compared with 23% three months ago. Major reasons given for the decline in confidence were falling commodity prices, overseas markets/economies, the rising exchange rate and concerns about rising costs.
But that isn't stopping them from spending - 64% plan to stick with their planned levels of investment, and 18% intend to spend more. Just 18% of farmers surveyed in the sector plan to cut investment in their business.
Fifty seven percent of dairy farmers expect the agricultural economy to worsen compared to 45% in the last survey.
Rabobank rural general manager Ben Russell said dairy optimism had been expected to be down in the wake of Fonterra's forecast 12% drop in payout, and a high exchange rate on the New Zealand dollar, but lamb prices had been strong.
"This drop in confidence came despite strong farm gate prices for lamb," Russell said. Beef farmers had been experiencing moderating prices and an uncertain outlook.
Farmers generally had lower expectations of their own businesses over the next 12 months.
Suvey summary
Over the whole survey, 35% expected their business performance to worsen, compared with 23% at the time of the previous survey.
Just 22% expected business performance to improve, down from 34%.
Investment intentions also dropped with 26% now expecting to decrease their total farm business investment compared to 21% previously.
Russell said 42% of dairy farmers plan to reduce investment. Only 9% planned to increase their stake in the farm, though he noted this was after several years of considerable investment and expansion in the dairy industry.
Survey results showed farm debt levels are likely to be either maintained or reduced based on the results of the survey.
More than half the farmers (55%) said they planned to maintain debt levels and 21% planned to pay off debt.
Those increasing debt intended to bolster their working capital (15% of the total survey) or undertake further investment and property purchases (8%).
Reserve Bank figures showed a drop in the growth of rural debt for the first five months of 2009, at 4.7% compared with 9.3% for the same period in 2008.
Dairy farmers had the greatest need for working capital, with 28% expecting to take on extra debt, and only 13% of dairy farmers intended to reduce their debt.
Russell said the rising exchange rate had taken a toll on farmer sentiment: the exchange rate was now around US63 cents compared to US55 cents at the time of the previous survey.
But Rabobank remained confident that the food and agribusiness sector would be one of the first to benefit from recovery in the global economy.
