Farmers’ economic confidence improved in the first months of 2010, boosted by sheep and beef prices although optimism in some regions was restrained by drought conditions, a new Rabobank survey shows. It found 34 percent of farmers expected the rural economy to improve in the next year, up from 32 percent previously, while the proportion of farmers expecting conditions to worsen fell to 11 percent from 26 percent reports The ODT.

The Rabobank rural confidence survey was completed this month but before yesterday’s announcement by Fonterra that it had increased its milk price forecast for this season by 40c to $6.10 a kg of milksolids. Rabobank general manager rural NZ Ben Russell said the survey showed much of the improvement in rural confidence had been driven by sheep and beef farmers, who had a more optimistic outlook about their sectors. Factors working in the favour of sheep and beef producers included a small fall in the NZ dollar during the survey period, and good news in terms of commodity prices in the sectors.

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NZ rural confidence has staged a rally on the back of a good start to spring growing conditions reports Scoop. However, farmer sentiment remains at low levels, held back by concerns about the rising dollar and volatile commodity prices, according to the latest quarterly Rabobank Rural Confidence Survey.

The survey – conducted across NZ last month – shows 22% of the country’s farmers expect the rural economy to improve in the next 12 months, a marked increase from the only 12 per cent who had that expectation in the previous quarter. And while 25% of farmers still expect conditions to worsen, this was a big drop on the 49 per cent with that view in the previous survey. This latest rise in confidence follows three previous consecutive declines.

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“The results make for ugly reading and illustrates that the recession’s full bite is yet to come,” says Don Nicolson, President of Federated Farmers. “Coming off the back of the Ministry of Agriculture and Forestry’s latest situation report, farmers remain deeply pessimistic about the state of the general economy and their own prospects for the next 12 months. “A net 45 percent of farmers believe the economy will deteriorate further casting doubt on those calling the recession’s end.  This has major ramifications for Thursday’s Monetary Policy Statement and Official Cash Rate decision.

“While Dr Bollard seems set to keep interest rates on hold, this survey and the concussive effect of low dairy payouts for the foreseeable future, raises the spectre of an ‘L’ shaped recession where the economy will bump along the bottom for a number of quarters. “Federated Farmers economists believe urban New Zealand is yet to feel the full effect of the slowdown striking the provincial economy.  “Over three quarters of dairy farmers expect business profits to be lower.  A net 36 percent of all farmers expect to reduce spending over the coming 12 months, again led by dairy. “While export prospects and the outlook for agriculture over the medium term remain excellent, returns for the past season and the forthcoming season will be down.

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