The latest Rabobank Rural Confidence Survey shows the highest level of confidence among all agricultural sectors since the survey started in 2003 which is proof of the remarkable success of New Zealand agriculture and commodity prices, writes Allan Barber.
At a time when our dollar is also stronger against almost all, if not all, currencies over the same period, this is a surprising fact that most people would say is at least counterintuitive if not downright impossible.
Fifty seven percent of farmers surveyed now see a positive outlook for the next 12 months, up from 34 percent in the previous survey, in contrast to only three percent who think things will get worse. A net 41 percent of sheep and beef farmers see a positive outlook, up from just net two percent in the first 2017 survey, while a net 61 percent of dairy farmers and 38 percent of horticulturalists are also bullish. Not surprisingly, improving commodity prices are the main reason for this burst in confidence.
The new level of confidence will also result in increased investment with 52 percent of horticultural growers, 32 percent of sheep and beef farmers and 43 percent of dairy farmers intending to invest more in their businesses, also the highest percentage since the survey began. Interestingly sheep and beef farmers’ investment intentions were pretty close last time at 28 percent despite the low net confidence level, whereas dairy farmers’ positive investment percentage climbed from a similar level of 29 percent.
Forty percent of farmers intended to spend more on fertiliser, animal feed or machinery as against only eight percent who plan to spend less. Not unnaturally dairy farmers have the most positive intentions, having had to undergo significant belt-tightening for the last two years.
I found the graph of confidence surveys since 2003 particularly interesting, because the overall trend lines between dairy and sheep and beef were remarkably similar most of the time with only occasional large deviations between them. As expected, there were occasional pronounced spikes for dairy, notably in 2007, 2009/10 and 2016/17 with smaller spikes in 2013 and 2015, while sheep and beef had higher although less pronounced confidence levels in 2004, 2006, 2011 and 2014/15.
However, the confidence trend line moved in opposite directions on only two occasions – in November 2009 and November 2016. Throughout the 14 year period, apart from those two surveys, dairy and sheep and beef farmer confidence moved in the same direction, but with varying degrees of divergence.
The most notable aspect of the research, conducted across a sample of 450 farmers, is the unmistakably positive trend from a low point of -60 to -70 percent in 2003 to the positive point today.
Admittedly, confidence has fluctuated up and down according to commodity price movements and demand for our products overseas, but this will continue to be the case for the foreseeable future.