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Europe Dampens NZ Farmer Confidence

26 January 2012, at 6:05am

NEW ZEALAND - Federated Farmers mid-season Farm Confidence Survey, conducted in January 2012, reveals farmer confidence in the general economy has turned negative for the first time since July 2009. Europe and the global economy increasingly weigh upon farmer outlook.

"While farmers are confident in their own businesses, there's been a big deterioration in the global economy since July, when the 2011/12 season began,"? says Bruce Wills, Federated Farmers President and its economics and commerce spokesperson.

"Concerns about sovereign debt, volatility in global financial markets and weakened economic activity has potential to spread outwards from the Eurozone especially. New Zealand's major trading partners in the Asia-Pacific region have experienced weaker export growth and the ramification of this isn't lost on farmers.

"While the drop in farmer confidence we recorded is in line with other surveys, the good news is that farmers' confidence in their own profitability remains strong, despite being down on what it was at the start of the season in July.

"One explanation is the mild weather in a majority of pastoral areas. This has seen good spring/early summer growing conditions and farmers expect to increase production in the next 12-months.

"The weather has helped offset commodity prices coming off recent peaks. Sentiment would have even more bullish, if not for the La Nina influenced dry conditions affecting Southland, Otago and North Otago, when our survey was in the field.

"Farmers' expectations for spending and for debt both remain at similar levels to the start of the new season and this is encouraging. Farmers are taking advantage of current conditions, physically and economically, to strengthen farm balance sheets.

"In keeping with Federated Farmers stressing agriculture's many employment opportunities, the labour market for skilled staff has tightened. There has been an increase in farmers reporting it harder to find staff.

"Overall, Federated mid-season Farm Confidence Survey literally shows that Kiwi farmers are making hay while the sun shines,"? Mr Wills concluded.

The headline results from the January 2012 Farm Confidence Survey, compared to the new season survey undertaken in July 2011:

  • A net 4.4 per cent of respondents expect the general economy to worsen over the coming 12 months (down 20.8 points).
  • A net 31.6 per cent of respondents expect their profitability to improve over the coming 12 months (down 14.2 points).
  • A net 47.7 per cent of farmers expect to increase production over the coming 12 months (down 2.7 points).
  • A net 33.5 per cent of farmers expect to increase spending over the coming 12 months, (up 0.2 points).
  • A net 44.3 per cent of farmers expect to reduce debt over the coming 12 months (down 1.3 points).
  • A net 11.2 per cent of respondents reported it harder to find skilled and motivated staff over the past six months (up 5.5 points).
  • Regulation and compliance costs have become the biggest concern for farmers, with 17.1 per cent of respondents citing it has their biggest issue (up 5.1 points on July 2011).
  • Farmers continue to believe that the Government's highest priority should be fiscal policy (i.e., reducing government spending and/or reducing government debt), with 24.7 per cent of respondents citing it as their highest priority (down 1.6 points on July).