Red meat sector farmer confidence edging up, says Rabobank

Hayley Moynihan, Rabobank.

This year has begun on a positive note for the country’s farmers, with rural confidence levels edging up, primarily driven by signs of renewed optimism among beef and sheep producers and horticulture.

The first quarterly Rabobank Rural Confidence Survey for the year – completed earlier this month – has shown net farmer confidence has risen to positive +27 percent, up from +25 percent recorded in the December 2016 survey.

While the survey found the number of New Zealand farmers expecting the agricultural economy to improve in the year ahead had declined slightly to 34 per cent of those surveyed (compared with 39 per cent in the previous quarter) – those expecting agricultural economic conditions to worsen had halved to seven per cent of survey respondents (from 14 percent).

Rabobank New Zealand general manager for Country Banking Hayley Moynihan says this was the lowest reading for a pessimistic outlook on the agricultural economy recorded among farmers since December 2013.

The latest survey also showed the number of farmers expecting the agricultural economy to remain stable over the next 12 months had climbed to 55 percent of those surveyed, up from 42 percent previously.

Horticulture producers and sheep and beef farmers had shown signs of increasing optimism about the agricultural economy, she comments. The overall net confidence reading in the horticulture sector climbed from +26 percent to +39 percent, while among the sheep and beef sector, confidence moved out of negative territory, from -5 per cent to +9 per cent.

“There has been cause of optimism across these sectors recently,” she says. “There has been positive news on the price front for sheepmeat, and lamb in particular, with prices holding steady even after the boats left our shores in February with Easter trade chilled product on board bound for export markets. Typically, we’d see a decline in prices after this all-important chilled Easter trade period. But this year, due to a mix of good offshore retail markets but largely tight supply with plenty of grass around, prices have actually lifted slightly.”

 

Overall, the number of New Zealand farmers expecting improved business performance this survey was marginally lower, with 41 percent of those surveyed forecasting an improvement in the performance of their farm business in the next 12 months (down from 42 percent previously). That said, there were fewer farmers expecting their business performance to worsen – at 10 percent (down from 21 percent). More were expecting performance levels to remain the same – 48 percent of those surveyed (up from 34 percent). This saw the net measure in expected business performance lift to 31 percent (from 21 percent previously).

Sheep and beef farmers had recorded the biggest turnaround in expectations for their businesses, with the net indicator for this measure in their sector moving back – albeit just – into positive territory with a +2 per cent net reading (up from -25 percent).

According to Moynihan, while tight lamb supply had helped schedules remain steady, end demand for product continued to be weak due to “global forces”.

“Unfavourable exchange rates relative to other key export markets continue to provide headwinds to better returns,” she says.

“Similar to lamb, beef prices have benefited from tight supply, in addition to rising prices in New Zealand’s largest beef export market of the US. However, a forecast increase in US beef production is expected to put pressure on New Zealand beef prices in the second half of 2017.”

 

The bank says farmer investment intentions increased further this quarter, and are at the highest level since the end of 2014. The number of farmers expecting to invest more in their businesses in the next 12 months rose to 31 per cent (up from 28 per cent), while those intending to reduce investment declined to just seven per cent.

Expansion plans in horticulture are seeing this sector, in particular, lead the investment charge, says Moynihan.

Conducted since 2003, the Rabobank Rural Confidence Survey is administered by independent research agency TNS, interviewing a panel of approximately 450 farmers each quarter.

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