Cautious optimism over spendup at Fieldays
Economists and the credit industry expect farmers to open their wallets a little from today, despite a party-dampening forecast from the Primary Industries Ministry, easing commodity prices, a lower dairy payout, and jitters about the Greek elections and Spanish bailout.
Rabobank senior analyst Hayley Moynihan said dairy farmers, sheep and beef producers have had a couple of good seasons and are "quite buoyed", meaning there should be a broader range of spending at Fieldays this year.
And credit tracking bureau Veda New Zealand can support its prediction of "reasonably buoyant" spending at Fieldays with some hard figures.
Managing director John Roberts said for the first time in five years credit demand has turned up slightly, with babyboomers showing the greatest renewed appetite for credit.
In May new applications for credit cards were 17 per cent up on the same time last year. Personal loan applications rose by 19 per cent in the period, while mortgage enquiries jumped by 35 per cent, he said.
Federated Farmers vice president William Rolleston said the near-term outlook seems "overwhelmingly positive" for agriculture.
But ANZ/National chief economist Cameron Bagrie said he was more interested in the "general spirit or uptake enthusiasm" for the event.
"I will be looking for the degree of innovation, what people are actually doing, and how many turn up, the participation of industry support groups," said Mr Bagrie.
"To me this will show if we are really getting with the programme in getting things in place for New Zealand agriculture to lead that drive.
"People get caught up in the spending it's relevant but it's not the main story."
However, Mr Bagrie believes there will be "a bit spent" at Fieldays.
So does Stuart Locke, director of Waikato University's institute for business research who also believes Fieldays is more important as a showcase for much-needed progress on downstream processing of primary products.
"Fieldays shouldn't be just about saddles and gates and tractor pulling. It is about learning opportunities and networks."
NZ Institute of Economic Research principal economist Shamubeel Eaqub said spending could be up at Fieldays given new farm building consents and tractor sales were up, "but farmers will still be careful; there won't be the kind of euphoria and craziness of 2007 and 2008".
He said resolution of the European economic crisis would take years, not months.
This affected New Zealand because 10 per cent of our exports went to Europe each year, and our main markets China, Asia and Australia were very affected by Europe.
Meanwhile manufacturers and exporters were facing the double whammy of lower commodity prices and increased global milk production.
DairyNZ expected farmers not mortgaged to the hilt to spend at Fieldays.
But the organisation's indicative costs forecast for the "average" farmer this 2012-2013 season is sobering.
With a $5.50/kg milksolids forecast payout this season, chief executive Tim Mackle said that farmer will have to find $4.35/kg for tax, expenses and drawings, and $1.50/kg for interest payments.
Fonterra's total payout forecast, including dividend, is for $5.95-$6.05.
The average owner-operator's term debt is still $19/kg compared to $21.65/kg in 2009-2010, Dr Mackle said.