3 Jul 2014

Dairy farmer confidence falls

7:49 am on 3 July 2014

Falling dairy commodity prices and higher interest rates have hit farmer optimism for six, the latest rural confidence survey shows.

The Rabobank quarterly survey shows overall farmer confidence has tumbled to just 25 percent of participants feeling positive about the the agricultural economy over the next year, down from 42 percent in the previous survey.

A Rabobank spokesperson said dairy farmer pessimism was driving that, mainly due to the expected reduction in milk payouts because of falling dairy commodity prices, following on from the record 2013-14 season. The pressure on export returns from the strengthening New Zealand dollar had also influenced their outlook.

However, sheep and beef farmers - buoyed by improving meat prices - bucked the pessimism trend; 57 percent reported a positive outlook compared with 37 percent in the previous survey.

The also survey showed farmers were concerned about rising interest rates.

Rabobank New Zealand chief executive Ben Russell said that was not surprising, with the Reserve Bank hiking up the official cash rate three times in as many months and signalling the likelihood of further rises.

He said that would influence farmers' plans in terms of spending and investment in the coming year.

The survey showed that while 93 percent of farmers intended to increase or maintain the level of investment in their farm businesses, dairy farmers had lowered their expectations in that area.