Farmers’ pessimistic outlook

Pessimists overwhelmingly outnumber optimists in Federated Farmers' new-season July 2015 Farm Confidence Survey, which has moved further into negative territory for both the economy in general and farm profitability.

'The long term outlook for farming is optimistic,” says Dr. William Rolleston, president of Federated Farmers of New Zealand, 'but to get the value from future opportunities, farmers have to survive the short term situation.”


Photo: File.

The survey shows 28.2 per cent of respondents expect general economic conditions to worsen over the next 12 months while 42.9 expect their own farm's profitability to worsen over the same period.

Other results include 38.5 expecting to reduce on-farm spending over the next 12 months and 25.7 per cent expect to their farm debt to increase.

William says those results are not surprising given low farm gate prices and droughts. However, he admits there is good reason for long-term optimism.

'The world population is growing with an increasing demand for high quality animal protein which we are in a perfect position to supply,” he says.

'Farming is cyclical, and those who have been in the industry for a long time may be better placed than newcomers to survive the down turn. But the current situation is not easy for anyone and can lead to mental health problems.”

William says Federated Farmers, which launched the mental health campaign 'Life's a Bitch” three years ago, is aware a number of farmers are asking for help.

'It is good they are doing so as talking about their concerns really helps,” he adds.

A little more understanding of farmers' plight by urban Kiwis and environmental groups would be appreciated, he says.

A Federated Farmers and DairyNZ survey of New Zealand dairy farmers' environmental investments shows an estimated spend of over $1billion over the past five years.

'The public will have to understand farmers will not be moving as fast on environmental investments now, with less money in the bank, but that is no excuse for going backwards,” says William.

The confidence survey shows the main factors influencing farmers' mood include world dairy prices in the doldrums and Fonterra's initial forecast for 2015/16 of $5.25 per kilogram of milk solid, even though that is up $0.85 on its initial forecast the previous season.

With the Global Dairy Trade prices continuing to fall since the opening forecast was made, and overall down 34 per cent since March, the forecast is looking more and more challenging. Most dairy farmers expect their profitability to worsen.


Federated Farmers of New Zealand president Dr. William Rolleston. Photo: File.

Farmers on the East Coast of the South Island experienced a drought this past summer, while sheep and beef farmers have sent stock to slaughter early.

That, plus a higher than usual dairy cull cow kill, increased supply at meat processors and reduced schedule prices.

Production expectations, which were hit in January by the drought and by the low dairy pay-out, have also eased back further in this survey, although they remain positive.

A silver lining has been a 12.5 per cent drop in the New Zealand Dollar since April.

This should act as a buffer to weak world prices, which could fall to what would be more of a ‘fair value' given the 25 per cent fall in world commodity prices since March 2014.

Pessimism about profitability is reflected in farmers' spending intentions. A higher proportion of farmers expect to reduce spending to levels of sentiment not seen since the Global Financial Crisis.

The intention to close cheque books is especially strong among dairy farmers.

More farmers expect to increase debt than reduce debt, while the support of banks will be important over this challenging period.

The agricultural labour market remains tight but appears to have eased slightly since January, and slightly fewer farmers report it is harder to find skilled and motivated staff.

The biggest concern for farmers is commodity and farmgate prices, cited by nearly 37 per cent.

This was followed by regulation and compliance costs, with 17 per cent, the weather, with 13 per cent, and industry specific issues, with 11 percent.

A jump in concern about industry specific issues reflects farmer dissatisfaction with the performance of Fonterra and the meat industry.

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2 comments

520 Fonterra staff to go?

Posted on 16-07-2015 21:14 | By YOGI BEAR

Saving $60 million about $115,000 each and some. The comparison at TCC is actually the same, the difference is Fonterra depends on the market where as TCC just add it to rates. Get the picture.


Income from Fonterra

Posted on 17-07-2015 00:07 | By YOGI BEAR

Looks like the $7.90/kg is dropping a bit to about $3.75/kg by what one bank is saying. That is just under half. That means not many farms will break even on that one, most will make a loss or a huge loss. how about all NZ help out and take a pay cut like the farmers, 1/2 pay for the next year? Only fair to share the hardship around a bit. Then all the employers can 1/2 the price of everything and then everyone will be heaps better off right.


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