News -

Farmer confidence dips slightly, farm confidence survey shows

In the latest Federated Farmers survey of farmer confidence, at the start of the 20010/11 season, only a net 2.9 percent of farmers expect the economy to improve. As this has declined slightly from January's survey, Federated Farmers believes it provides evidence why the Reserve Bank needs to keep the Official Cash Rate (OCR) on hold at 2.75 percent.

"While farmers are not overly optimistic about general economic conditions they are slightly more upbeat about the profitability of their own farms, but then again, that's off recession like levels," says Philip York, Federated Farmers economics and commerce spokesperson.

"One general economic barometer is recruitment and farm employers are now reporting it easier to find skilled staff than in January, where we found a tightening labour market.

"Federated Farmers is buoyed by the way farmers have responded to policy signals to reduce debt levels. This is not just a dairy phenomenon. We see meat and fibre farmers as well as grains farmers moving in this direction as well. Debt reduction must be encouraged and keeping the OCR on hold will greatly facilitate debt retirement.

"While dairy farmers are the most optimistic, for sheep and beef farmers as well as grains farmers, things are much less rosy. Among grains farmers there is a strong underlying pessimism about industry factors that Federated Farmers is looking into. It is also significant the current state of the meat and wool industries is now a named concern.

"Yet the single biggest issue for farmers at the start of the 2010/11 season is the Emissions Trading Scheme (ETS).

"30 percent of respondents cite that as their main business concern and this worries Federated Farmers. While there has been uninformed comment that farming is ‘ETS immune', farmers are heavily exposed to power and fuel price increases and the cascade impact these have upon farm inputs. Respondents want the Government to either scrap the ETS or further moderate it.

"Significantly, farmers are detecting increases in the cost of farm inputs based on assumed higher payouts which are yet to be earned. This includes the non-tradable sector led by central and local central and government costs. The Federation will need to look closer at this.

"Commodity price levels and volatility were major concerns influenced by the exchange rate. We are concerned that any tightening of the OCR this week will put upwards pressure on the Kiwi, to the detriment of the entire export sector.

"Farmers also feel deep unease about the size of Government in the economy, which, while forecast to fall, will only do so gradually. Reducing the Government's size will reduce compliance costs and regulatory blockages leaving more money for productive investment.

"Federated Farmers and farmers are pleased the Government adopted the New Zealand Productivity Commission Bill, which had it's first reading late last week. In light of the mining backdown, it is a positive signal to business, along with planned amendments to the Employment Relations Act and the Holidays Act.

"Yet, given many farm business concerns revolve about unnecessary compliance, we ask why there has been only glacial progress on the Regulatory Responsibility Bill, which is currently subject to a discussion document.

"These legislative tools, we believe, will enforce a much needed cultural shift within Government that will lift the profitability of New Zealand's farmer-exporters," Mr York concluded.