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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Farmers appear to have hunkered down to ride out the recession with farm sales tumbling as a confidence survey shows low expectations of economic improvement reports Stuff.  Just 285 farms changed hands in the three months to June, according to the latest Real Estate Institute statistics, compared with 711 farms for the same period last year.This lack of confidence is reflected in a Rabobank survey showing 49% of farmers expect the rural economy to worsen in the next 12 months. Only 12% expect conditions to improve. The survey was conducted across NZ a month ago and is the third in a row to record a fall in confidence.

Rabobank rural manager Ben Russell said the survey also showed farmers were aiming to consolidate or lower debt levels to ride out the tough economic times and position themselves for better times ahead. The rising currency had been taking its toll on farmer sentiment, with the dollar now sitting at around US63 cents compared with US55c at the time of the previous survey. This challenge is compounding ongoing concerns already being felt about declining commodity prices in some key sectors, along with worries about global economic conditions,” he said. While farmers were rightly concerned about the impact of tough financial conditions upon their businesses, Rabobank remained confident that the food and agribusiness sector would be one of the first to benefit from recovery in the global economy, and that farmers were effectively adapting their businesses to the conditions.

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As the farm gate price for lamb hits record levels opinion is divided on whether it’s enough to see the declining industry turn a corner reports The NZ Herald. The national sheep flock is now down to levels not seen since 1950. Rabobank’s latest Agribusiness Review said farm gate lamb prices had strengthened since January, hitting levels more than 50 % up on last year. Rabobank senior analyst Hayley Moynihan said prices would be enough to improve profitability but were probably not enough to encourage more investment. The smaller flock had pushed up prices, she said.

“Our sheep flock has fallen so much because producers have got out because it’s unprofitable, but they’re not yet at the point where producers are going to start expanding the flock numbers again. “I’m not sure that farmers necessarily have the confidence that we’ll see the next five years at these prices for example, it’s been reasonably short term so far.” According to Statistics NZ the national sheep flock was 34.1 million as at June 30, 2008 – a drop of 11 % on the previous year and the largest annual fall since numbers peaked at 70.3 million in 1982.

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 Some more scary reading about agricultural debt, especially  about the biggest borrowers the dairy industry by Agricultural Production Economics. This analysis started as an attempt to determine the conditions under which it would be possible to reduce farm debt, and an assessment of how that might transpire over the next ten years. It was quickly apparent that the conditions required for farm debt to reduce are simply not realistic for farms with high debt. Even dairy farms with average levels of debt will need favourable conditions to service existing debt – let alone repay it. It is worth noting that Australian dairy farm debt per Kg of MS appears to be less than half that of NZ.

Once again we concentrate on the dairy industry because it is simple to analyse and carries most agricultural debt i.e. 61.5% of the total. On that basis the dairy industry had farm debt of $27,499 million out of $44,714 million at the end of March 2009. NZ milk production will be approximated to 1.3 billion Kg of milk solids (MS). Average dairy farm debt is a little over $21.00 per Kg of milk solids produced for those interested. But with average debt of $47.59 per Kg of milk solids the most indebted third of NZ’s dairy production is almost certainly already in a situation of negative equity. Decreases in Fonterra’s equity, dairy cow prices and farm values will not help the picture but are unnecessary – understanding future debt servicing costs adequately conveys the gravity of the situation alone.

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Farmer confidence has fallen amid concerns about commodity prices and global market issues.

The latest quarterly Rabobank rural confidence survey, taken about a month ago and published yesterday, found 33 per cent of farmers expected the agricultural economy to worsen in the next 12 months.

That was up from 29 per cent in November when the survey was last taken. The number expecting conditions to remain stable declined to 38 per cent, compared with 44 per cent previously.

The smaller number of lambs born in spring 2008 is having a big impact on supply and the prices farmers are getting now, according to Rabobank’s latest Agri-business review reports The Dom Post. Lamb volumes processed are now 1.2 million behind the same period last year. That’s 9 % , with the bulk of the variance coming from the South Island.”The further 2 % lift in prices over the past month also reflects very tight supply. Farm- gate prices have been maintained at around $5 a kilogram over the peak processing season,” the report said.

Prices for lamb now sit around 50% higher than this time last season in the North Island, and more than 80 % higher in the South Island. Rabobank said January export totals told the story of reduced supply. “However, export value increased 12% , or by $32 million for the month as the lower NZ dollar also played a role.” The Agri-business review said although farm-gate beef prices had eased, prices still remained 10-20% above the same period last year. And while cattle slaughter is tracking above the previous season, it is virtually all due to an increase in cow slaughter rates, which are sitting 37% ahead of last season. “That’s due to the change in cull dairy-cow slaughter rates with a lower dairy payout and reduced herd expansion.”

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The Federated Farmers/Rabobank Farm Employee Remuneration Report has found that in the year to August 2008, farm workers earned an average income $2,000 more than the average non-farm income. Farm workers earned an average income of $41,914 compared to the average non-farm income of $39,517. “The 2008 Federated Farmers/Rabobank report proves average wage levels are higher on-farm. This is good news and reflects a new belief that agriculture offers a viable career option,” says Don Nicolson, Federated Farmers President.

“The average New Zealand farm worker earned more than $2,000 more than the national average income. This does not take into account a farm workers’ total package value that actually pushes their income well above the average. “A quick check of the online job sites has just under 500 jobs listed right now and that’s only a snapshot in time. We literally need thousands of people to take up farming in order to cover retirements, people leaving the industry as well as filling the new jobs being created. Farming is a highly skilled and highly valued occupation. The Federation is moving to help meet the need for talented staff by establishing a rural jobs website to promote the many rural vacancies that exist reports fencepost.

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The report on farm inputs from agribusiness lender Rabobank says international prices for key inputs have fallen recently and, although domestic prices were taking time to follow, there would be some relief for NZ farmers as input prices were set to remain below historical highs during 2009. The international market had seen US dollar prices for major inputs such as fertilisers fall by between 60% and 75% since their record highs in mid-2008 reports The ODT.

However, according to the report’s author Rabobank analyst Adam Tomlinson, a sharp reversal of the NZ exchange rate against the US dollar in late 2008 effectively offset a large portion of declining international prices, tempering the benefits felt by farmers.  “International prices for fertilisers are expected to remain low for the next few years in view of increased fertiliser production capacity at lower price levels flowing through to the supply chain.”

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Every blade of grass counts on the Mavor family’s intensive North Otago sheep and beef operation. Pasture management is King on the family’s Oamaru farm. Pastures are measured and monitored and stock managed to ensure they are maximising productivity from every kilogram of drymatter grown. The Mavors success as meat producers was recognised when they recently won this year’s Rabobank Lincoln University Foundation Farmer of the Year competition reports Country- Wide.

The driver of the Mavors’ simple yet intensive farm management system is contracts, and the family have contracts with both Five Star Beef and Canterbury Meat Packers (CMP) who buy their lamb. Colin, who runs the farm with his wife Denise, son Stefan and Stefan’s wife Teressa, says it is the deadlines contained within these contracts that get them out of bed in the morning.

But the confidence to deliver is only made possible through a recently installed irrigation system and a very reliable water supply. Five years ago the family, who are shareholders in the lower Waitaki irrigation scheme, installed their k-line irrigation system which has enabled them to water 250ha of the 625ha they farm. The k-lines are on a 12 hour irrigation cycle applying 32mm, but like everything on the farm, soil moisture levels are monitored through an aquaflex and hand-held moisture probes.

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Results at a Glance
• Farmer confidence has declined due to concerns about commodity prices and global market issues.
• Dairy farmers have recorded the largest drops in confidence.
• Sentiment also down across all other sectors.
• Farmers’ business investment intentions remain robust.

New Zealand farmer confidence has slumped as concerns about global financial markets and flagging commodity prices take hold, according to the latest quarterly Rabobank/Nielsen Rural Confidence Survey. The latest figures show New Zealand rural confidence has moved into negative territory, with more farmers now expecting conditions to worsen than to improve.