Rural confidence slips, why New Zealand farmers are worried

New Zealand rural confidence has dropped for the third consecutive quarter, with dairy farmers the most concerned about the future.

The last Rabobank Rural Confidence Survey for the year, completed last month, has shown the nation's net farmer confidence has fallen to -15 percent, down from -3 percent recorded in the September 2018 survey.

The survey found a decline in the number of farmers expecting agricultural economic conditions to improve in the coming 12 months (down to 14 percent from 20 percent last quarter), while an increased number of New Zealand farmers were expecting the performance of the agricultural economy to worsen (29 percent from 23 percent last survey). 

The number of farmers expecting conditions to remain the same stood at 53 percent, (down from 54 percent previously).

Rabobank New Zealand general manager for Country Banking, Hayley Gourley, said, while horticulturalists were more positive in their outlook, the overall drop in farmer confidence had been driven by greater pessimism among pastoral farmers.

Hayley Gourley says the biggest confidence drop as been among dairy farmers.
Hayley Gourley says the biggest confidence drop as been among dairy farmers. Photo credit: Supplied

"Horticulturalists' net confidence flipped from negative to positive this quarter, rising from 4 percent last survey to +9 percent, however, there were significant falls in confidence for dairy farmers, with sentiment declining to a net reading of -21 percent from 9 percent last quarter, and for sheep and beef farmers, with confidence dropping to 12 percent from +7 percent previously," she said.

"In both of New Zealand's key pastoral sectors there are now more farmers expecting conditions in the agricultural economy to worsen in the coming year, than those expecting an improvement, and this is this first time we've seen this since quarter one 2016," said Ms Gourley.

She said this is particularly unusual during a period where product prices are at good levels and the climate has generally been favourable for most producers.

Among those New Zealand farmers expecting conditions to deteriorate, the survey found the most significantly cited concern was government policies (45 percent) while falling commodity prices (37 percent), rising input costs (28 percent) and overseas markets (27 percent) also featured prominently.

"Rather than one single factor driving confidence lower, the survey results indicate a range of factors are responsible."

The survey showed the proportion of farmers citing government policy as a reason for a negative outlook was relatively stable from last quarter, however, it saw a jump in the numberof farmers flagging concerns over falling commodity prices, rising input costs and overseas markets.