9 Feb 2015

Slump in farmer confidence 'not surprising'

2:03 pm on 9 February 2015

Federated Farmers says a slump in farmers' confidence is not surprising, given the drop in milk prices and the on-going dry conditions.

Its Farm Confidence Survey, taken last month showed that nearly 80 percent of dairy farmers expect their income to drop from last year and livestock farmers generally are more pessimistic about the economy and farm profitability.

However, over 20 percent of farmers did expect to increase production over the coming year.

Federated Farmers president Dr William Rolleston said a drop in income was expected off the back of last season's record payout.

"It does have to be remembered that we had a record payout in the dairy sector last year and so if you like there was only one way to go and that was for prices to come off, but I think that the outcome of the survey reflects there was a significant fall in dairy prices over the last year, almost 50 percent."

Dr Rolleston said the dry across eastern parts of the country was affecting both dairy and sheep and beef prices.

He said a higher than usual dairy cull cow kill had increased supply at meat processors, which reduced prices.

"It's always a problem with a drought, for sheep and beef farmers it's that everybody needs to quit stock at the same time and that tends to push prices down, just normal supply and demand, and the tougher thing for sheep and beef farmers is that when they go to re-stock of course everyone else is wanting to re-stock as well and that pushes prices up, so they sell on a down market and have to buy on a high market, which is particularly tough.

"The issues with the drought are not just that it's tough now, it's actually going to be tough particularly if we don't get significant rain in the autumn, it will be tough feeding animals towards the end of winter but also that re-stocking is where the financial pinch really comes in."

Mr Rolleston said the highest priority for a quarter of farmers surveyed was government regulation and compliance costs.