While the rural sector is being seen as vital to help the New Zealand economy through the COVID-19 crisis, a new survey has shown farmer confidence has taken a hit.
After climbing strongly in the December 2019 quarter, net farmer confidence in the broader agricultural economy in the Rabobank Rural Confidence Survey has fallen -44 percent in the March quarter, down from -12 percent previously.
Rabobank New Zealand CEO Todd Charteris said the results shine a light on the psyche of farmers at a critical time for the nation.
"The food and agri sectors will be crucial in helping to rebuild the New Zealand economy, and Rabobank continues to have a strong positive long-term view of the sector outlook.
"Having said that, our latest survey shows farmer sentiment has slipped since late 2019," said Charteris.
The survey also found a decrease in the number of farmers expecting agricultural economic conditions to improve in the coming 12 months (down to 12 per cent from 21 percent last quarter), while there were more farmers expecting conditions to worsen (56 percent from 33 percent previously).
The number of farmers expecting the performance of the agricultural economy to stay the same fell to 29 percent from 44 percent last quarter.
Among farmers with a negative outlook, the majority cited Covid-19 as a key factor for holding this view.
Charteris said during the period the survey was open between March 3 and 18, farmer concerns were likely to have been centred largely on the impact Covid-19 was having on Chinese demand for New Zealand agricultural products and the potential for the virus to result in similar demand falls in other global markets.
"Understandably this had a marked impact on farmer confidence, particularly in sheep and beef due to uncertainty over market access."
The survey found that farmers' expectations for their own business performance were also down, with fewer farmers expecting their businesses to have an improved financial performance in the coming 12 months.
Horticulturalists, however, remained the most positive about the performance of their individual businesses in the year ahead.
The threat of Covid-19 had also had a detrimental impact on farmer investment intentions, which were now weaker than in late 2019, according to the survey.
Fourteen percent of farmers now plan to increase investment in their farm business over the next 12 months with 21 percent expecting farm investment to decrease.
"Dairy farmers' investment intentions remained relatively unchanged from last quarter, however, there were more significant falls among both sheep and beef farmers and horticulturalists."
Despite farmers' concerns, Charteris said Rabobank remained committed to its clients and the rural sector, and also cautiously optimistic about the ability of the industry to navigate its way through the storm created by Covid-19.
"New Zealand's rural sector entered the Covid-19 crisis in relatively good shape, with strong commodity prices, low interest rates and a competitive Kiwi dollar.
"While Rabobank expects the virus will have a significant impact on the global economy, we think the sector is in a strong position to manage through these challenges."
He said New Zealand farmers and growers were among the most efficient food producers in the world which meant they were better placed than most to deal with the impacts stemming from the Covid-19 outbreak.
Shortly after the survey was completed Fonterra announced it was holding steady its forecast milk price range and earning guidance, and the New Zealand Government announced broader financial support for farmers in drought affected regions.