Sailing away

by david on July 25, 2017

A cupTO USE the latest America’s Cup parlance, the New Zealand primary sector is ‘up on its foils’ at present.

According to the latest Rabobank survey, farmer confidence and spending intentions jumped to record levels in the second quarter of this year, buoyed by improved commodity prices.

The survey, completed in June, shows net farmer confidence rose to 54% from 27% in the March quarter, hitting the highest level since the survey began in 2003. Spending intentions were also higher in all farm sectors: 40% of farmers expect to spend more in the next 12 months, up from 31% last quarter and also at a record high.

Meanwhile, the bank reports that farmers in all sectors were also more positive about the outlook for the agricultural economy in the June quarter, with 71% citing improved commodity prices as a key reason. Especially so dairy farmers, 77% of whom cited better commodity prices, while sheep and beef producers were at 66%.

“Buoyancy in the pastoral sectors is underpinned by strengthened farmgate returns across the industries,” says Rabobank NZ general manager for country banking Hayley Moynihan.

“Sheep and beef farmgate prices continue to hold steady at strong levels for beef and higher than first expected for lamb; and lower supply from NZ and other key export regions will underpin good returns over the coming months.

“Dairy commodity prices continue to strengthen thanks to steady demand and lower supply and this has recently been reflected in strong opening price signals for the new 2017-18 season by many dairy processors.”

At least half the farmers surveyed were anticipating the performance of their own farm business to improve over the next 12 months, lifting net confidence to 47%, the highest reading since late 2013.

Add to this the rollicking performance of the horticulture sector – kiwifruit, apple and avocados to name just a few — and the primary sector as a whole is looking good.

However, any one of our industries’ very own nemeses (dare we say ‘Jimmy Spithill’?) — such as currency, commodity price movements or lobbyists Greenpeace, Fish & Game or other activists — could arise to attack our good fortune at any time.

Farmers need to be prepared for these hiccups and ready to change tack. As Dairy NZ chief executive Tim Mackle warned dairy producers at last week’s SIDE conference: “Prices will fall again”.

“Farmers cannot be complacent and must focus on costs because there will be a next time,” Mackle stressed. “The key message is this: it doesn’t need to be quite as difficult as last time if we maintain our costs, get our debt sorted and get on with it.”

In the meantime, let’s hope our farmers and the wider NZ economy continue to enjoy the purple patch the primary sector now experiencing. Long

Previous post:

Next post: