25 Mar 2014

Farmer confidence drops - survey

4:52 pm on 25 March 2014

The latest rural confidence survey shows farmers' business outlook for the coming 12 months remains robust - but they aren't quite as bright as they have been.

The Rabobank surveys 450 farmers across different sectors each quarter and showed 42 percent believe the agricultural economy will improve this year - down from 56 percent last quarter.

Rabobank senior analyst Hayley Moynihan said several factors were responsible for the reduced confidence.

"Really (it's) a recognition that commodity prices, particularly for dairy, have probably peaked, and we'll start to see some easing on product returns," Ms Moynihan said.

"But an improvement in the horticultural sector largely on the back of a recovery in kiwifruit."

The survey also showed 13 percent believed conditions would deteriorate, up from 5 percent, while 44 percent believed things would stay the same.

The survey was conducted before the Official Cash Rate was lifted, and it also revealed nearly a third of farmers were having trouble attracting and maintaining labour.

The bank also released its dairy forecast this week, saying it believed dairy prices could ease by between 10 and 15 percent this year as global milk supply increased.

Ms Moynihan said the aggressive demand out of China for milk was expected to mellow.

"We expect that China will still purchase around 20 to 25 percent of the additional product that comes into the market in the first half of 2014," she said.

"But the rate of increase in Chinese purchasing will start to slow through the course of the year as their own production stabilises."