Positive signs help lift gloom
Farmers' confidence is entering positive territory again because of a lower New Zealand dollar, higher dairy prices and an approaching shortage of lamb.
The gloom appears to have lifted since the drought, when lamb prices were low and before the Fonterra forecasted payout of $7 a kilogram of milksolids was announced.
In a Rabobank survey this week, farmers, led by those in dairying, were found to be more confident and possessing a vastly improved outlook for the year ahead.
The survey showed more than half the country's farmers expected the rural economy to improve from 28 per cent the last quarter of the year, and only 8 per cent of surveyed farmers - previously 29 per cent - expected conditions to worsen.
The results appeared to match general farmer positivity, said Federated Farmers president Bruce Wills.
"It was encouraging to see the improved positivity in the Rabobank survey. They talked about a lower currency, which is certainly something I am sensing to bring some relief.
"We have seen in many areas a good recovery from the drought and that will boost confidence.
"I would be surprised if we didn't see a continued improvement in sentiment largely based on the currency and the Fonterra forecast of $7."
The silver lining in the sheep and beef sector is expected to come as prices rise because of lower supplies for the 2013-14 season.
Farmers were not confident earlier in the year, Wills said.
"It wasn't looking that flash and they were at the bottom of the hollow and stock numbers were down. I suspect they will be back 1 million ewes and a couple of million fewer lambs and that's a shame, but it will mean slightly improved prices next season."
Rabobank New Zealand chief executive Ben Russell said higher dairy commodity prices and a looming supply shortage of lamb and beef after the drought were helping to lift farmers' confidence.
The lower New Zealand dollar was another cause for optimism, he said.
Many farmers would be "breathing a sigh of relief" that the major difficulties of the past year were behind them and feeling that conditions could only improve.
Dairy farmers were the most optimistic in the survey, with 61 per cent expecting a better rural economy. Good autumn conditions had helped many farmers to make a swift recovery from the drought and spring milk production was not expected to suffer.
Sheep, beef and mixed farmers had a more positive outlook, with about 52 per cent expecting the agricultural economy to improve, up from 24 per cent.
About 55 per cent of farmers expected the performance of their farming business to improve, compared with 42 per cent, and only 10 per cent expected it to worsen, down from 21 per cent.
A larger confidence survey by Federated Farmers of 1000 farmers is due out soon and will reveal whether its results are the same as the Rabobank survey.
Wills said the deciding factor in farmers' confidence would probably rest on the kiwi.
"The key will be the currency and there has been a softening from the mid-80 cents to 78c. If the currency rebuilds, that will be a negative for confidence."
With sheep flocks at low levels, the drought recovery and uncertain lamb sales in Europe, farmers remained wary.
- © Fairfax NZ News