Latest farm confidence survey ‘a tale of two islands’
Released 27 Jan 2011
Federated Farmers latest mid-season farm confidence survey, has joined other recent business confidence indicators showing greater optimism in farming over the next 12 months. Confidence though remains patchy. South Island farmers have emerged a lot more optimistic than their La Niña hit counterparts in the North Island.
"Farmers are considerably more positive about the profitability of their own farms over the next 12 months and that's a positive," says Don Nicolson, Federated Farmers President.
"Dairy farmers remain the most optimistic of the Federation's industry groups, yet the gap with meat and fibre as well as grains farmers has narrowed in January. That's very positive for those industry groups.
"This narrowing partly reflects improved commodity prices with wool moving off a low base. It's also a reflection of reduced confidence felt by dairy farmers who, despite enjoying higher commodity prices, will be looking at reduced production and lower profits due to La Niña.
"South Island farmers were generally the optimists with a La Niña drought-like pall of gloom hanging over North Island farmers. Fewer North Island farmers expect to increase production when compared to last July's new season survey.
"Farmers were hoping for a repeat of the January rain seen in 1976 and 1989 and we may just be getting it. This rain is a liquid tonic of confidence for many farmers and should greatly reduce pressure heading into February and early autumn.
"It astonishes me, that completely unprompted, more than 25 percent of farmers cited rising input costs and compliance as their primary concerns. The Emissions Trading Scheme (ETS) is now, of course, considered to be a compliance cost.
"During this survey period, the worst floods in 169 years have hit the top of the South Island with drought-like conditions in North Island. Yet one in four farmers are still concerned about the insidious relationship between compliance and rising input costs. That speaks volumes.
"This compliance avalanche continues unabated with, for example, the new National Animal Identification and Tracing (NAIT) scheme having its first reading before Christmas.
"The ethic of reducing debt has continued into this survey with the proportion of farmers expecting to reduce debt increasing over the next 12 months.
"Many of the 14 percent in the survey looking to increase debt were borrowing ‘survival debt'. This was to get to a position where they could again invest in their business. It's why Federated Farmers is focused upon reducing compliance while increasing farm gate returns.
"What farmers also desire is for the banks to be more confident about farming and understand its seasonal and economic variability. We need the banks to be durable in their support and more than fair weather friends in such a dynamic sector.
"The farm labour market, while seasonal, appears to have tightened with a net 5.8 percent of respondents reporting it harder to find skilled and motivated staff. This is particularly evident in the South Island and is another indication of the optimism there.
"Overall, the confidence glass for most farmers is over half full. All we need are the policies that enable farmers to maximise their potential than be hindered by them," Mr Nicolson concluded.
For further information contact:
Don Nicolson, Federated Farmers president, 03 216 7405, 027 226 6331
To view the full report please click here.
