Economy, regulatory changes impact farmer confidence

In the July survey of 1,200 farmers, a net 47.8% of them considered current economic conditions to be bad, down 55.6 points from January when a net 7.8% considered conditions to be good.

Hoggard says while the fall in farmer confidence reflects concerns about inflation and interest rates, the government race to push through regulatory change is also a major factor.

"The frustration around all the regulation, the uncertainty, the hectic pace and nature of it, I think that is driving the mood as well.

"The Government needs to slow down and work out what they can achieve, not what they want to achieve," he told Dairy News.

"They've got to be able to bring people along with them, people have to have confidence the right people are being listened to, that concerns are being taken into account and that it is not all driven by one minister's wishes."

Hoggard says he is seeing the mood around all the regulatory processes is getting increasingly "septic" and people are "over it".

He is picking up there are implications for farmer mental health. “People are frustrated, questioning why they are slogging away in the mud and the rain.”

“But some of the feeling is maybe unwarranted,” he says. “Some of the farmers are thinking the entire country is against them when I know the entire country is not against them. They actually have a lot of support out there and it’s just the bureaucracy in Wellington may be partially against them and a lot of politicians may be against them, but not the country as a whole.”

Asked if there’s one thing the Government could do now for farmers to help lift the mood, he says a clear signal around the regulatory process that they are listening.

“That they are going to slow down on some of this stuff, that not everything has to be done before the end of the year so they don’t have to do anything in election year. And stop and work on the stuff that’s already been done and get that fixed first before embarking on anything new.

“We have seen with the Essential Freshwater package that was released two or three years ago with that nitrogen reporting date that’s had to be pushed back because stuff wasn’t ready.

“That’s another example of how that whole package of stuff was rushed, wasn’t thought through properly, didn’t go through a decent process and as a result, I can’t think of a single part of it that has stood the test of time.

“It has all been a complete and utter failure. The winter grazing regulations only lasted three days, the stock exclusion rules not much longer than that before they had to go back to the drawing board.

“When you look at what has happened with the nitrogen reporting, that’s another failure and I think we have got coming up supposedly all the regional councils have to have new plans in place for 2024 which I can’t see happening as well.”

But aside from regulation, inflation and interest rates are weighing heavily on farmers’ minds.

“If they have to go harder and harder on the cash rate to reduce inflation then it will pump up interest rates and that could see that (farmer) margins getting squished, so it might not look so rosy profitability wise.

“This is forward looking, so people have got that in their mind.”

The survey in January was at a low point even then, he says.

But confidence has plummeted again because “we knew inflation would be high but I don’t think we’d hit that 6-7% number then”.

“That extra increase in inflation is probably driving a hell of a lot of concern.”

High Milk Price A Buffer

The high milk price certainly gives a buffer, says Andrew Hoggard.

“If the milk price wasn’t where it is at we’d be really screwed because fertiliser prices have doubled, fuel’s up, energy is up, feed, grain, that is up – for a dairy farmer a lot of the costs are up, so the milk price has to be up otherwise people just wouldn’t be doing it.”

In Europe they are earning the same milk price but their costs are higher again, “so it is pretty bleak in other parts of the world as well”.

In the confidence survey a net 80.9% of respondents expect general economic conditions to worsen over the next 12 months, up 16.9 points on the January survey.

Despite the slide in confidence, farmers’ profitability expectations haven’t taken as big a hit as might have been indicated.

A net 55% of respondents said they are currently making a profit – six points down on the January survey.

Looking out over the next 12 months, a net 53.1% of respondents expect their profitability to decline, up 11.9 points on the January 2022 survey when a net 41.2% expected it to decline.

“What’s also worrying is that for the first time in our survey’s history we’ve recorded a net negative score for production expectations. A net 0.5% of farmers who answered our questions expect their production to decline over the next 12 months, down 2.3 points on the January result.”

A net 54.6% of respondents expect their spending to increase over the next 12 months, slightly up on January, “but this will be due to inflation of input prices rather than spending on more goods and services,” Hoggard says.