Rabobank New Zealand general manager for country banking, Bruce Weir, said the unrest in the Middle East had driven up costs for key farm inputs, which was the major driver of the lower farmer sentiment recorded in the latest survey.
“Since our quarter one survey concluded in early March, the Strait of Hormuz has been closed and, as a result, we’ve seen prices for fuel and fertiliser rise significantly and remain elevated.
“We’ve also seen second-round effects of the closure start to emerge, with elevated energy costs feeding into broader inflation expectations
“This has taken a bit of the wind out of farmers’ sails, and it’s hardly surprising sentiment has come back a little bit this quarter – especially given the survey concluded prior to the positive developments we’ve seen in regard to the conflict over recent days.”
Despite the dip in sentiment from last quarter, Weir said farmers remained broadly optimistic about the year ahead.
“Given everything that’s happening around the world, it’s really pleasing to see farmer confidence holding up so strongly.
“Off the back of strong demand from major overseas markets, pricing outlooks for all our key agri commodities remain healthy.
“And this is fuelling farmers’ confidence that another profitable season lies ahead.”
Own farm business performance
As with confidence in the broader agri economy, the survey found farmers remained upbeat about the prospects for their own businesses, but less so than in March.
Weir said the net reading on this measure had fallen to +13% from +36% previously, with farmers across all sector groupings recording lower confidence in their own businesses.
“Sheep and beef producers continue to be the most optimistic of all farmers, with tight global supply and strong demand supporting a positive outlook for red meat.
“Four in ten sheep and beef farmers now expect their own farm performance to improve in the year ahead, with only one in twenty expecting it to worsen.”
Weir said horticulturalists remained the least optimistic sector, with an even split between those expecting performance to improve and those expecting it to worsen over the next 12 months.
“While kiwifruit and several other horticultural subsectors are performing well, the outlook for others, like viticulture, is more challenging, and this is likely to have contributed to the lower overall score amongst horticulturalists on this measure.”
Rabobank New Zealand general manager for country banking, Bruce Weir.
Investment intentions lower but still strong
The survey found that New Zealand farmers’ investment intentions were marginally lower than last quarter, with 32% (unchanged) expecting to increase investment and only 12% (from 8%) expecting investment to fall.
This pushed the net reading on this measure down to +20% from +24% previously.
Weir said this remained a positive result.
“If we dig into the data, we see that on-farm infrastructure and new plant/machinery are some of the key areas farmers are looking to invest in.”
He said this was seen at last week’s National Fieldays, with the event organisers reporting near-record attendance numbers and many retailers reporting strong sales.
Listen to Jamie Mackay interview Bruce Weir on The Country below:
Land price expectations
The survey found that farmers expected rural land prices to increase modestly over the coming 12 months.
Weir said about a third of farmers were expecting land prices to increase over the year ahead, with only 8% expecting a fall.
“This is a weaker result than when we last measured land price expectations six months ago – when close to half of farmers were anticipating a lift – but does highlight a broad belief among farmers that prices will head north from here.”