NZ remains lowest-cost milk producer - report
The cost of producing milk in New Zealand continues to compare favourably with other exporting regions despite a lift in production costs over the past five years.
Following an historic low in September, the survey — completed during the last two weeks of November 2023 — found farmer confidence up to a net reading of -47% from -72% previously. The number of farmers expecting conditions to worsen over the next 12 months dropped from 77% to 58%, while those expecting conditions to improve rose from 5% to 11%.
However, despite this sizeable uplift, farmer sentiment remains low overall.
A majority of primary producers still expect the broader agricultural economy to worsen over the coming 12 months, while those who expect conditions to remain the same jumped from 15% to 29%.
Rabobank senior agriculture analyst Emma Higgins said dairy farmers recorded the biggest lift in sentiment, largely down to strong GDT results pushing dairy commodity prices – and the farmgate milk price forecast – higher.
“With this morale-boosting lift in the Fonterra payout coming just after the close of the latest survey period there’s a strong likelihood that, if taken today, dairy farmer confidence would be even higher,” she explained.
“While we did still see government policy featuring as a reason for pessimism [26%], we’ve also seen it come through as a major reason for optimism [59%].
Several announcements from the new government – including the decision to increase the size of the Recognised Seasonal Worker (RSE) scheme and the launch of a new $1.2 billion Regional Infrastructure Fund – appear to have landed well with farmers.”
Higgins added that overseas markets/ economies and rising commodity prices were the other key reasons cited by farmers for an optimistic outlook.
Meanwhile, falling commodity prices and rising input costs continued were the two most regularly cited reasons for pessimism.
Farmers across all sectors were found to be more optimistic about the prospects for their own farm businesses, with 15% of farmers (11% last quarter) now expecting the performance of their business to improve in the year ahead. Some 46% expect it to worsen (67% previously) and 37% expect performance to remain the same (from 21%).
However, while sheep and beef farmers are also generally more optimistic, their confidence remains depressed at a net reading of -62%. With lamb prices falling to their lowest level for this time of year since 2016 and little to indicate an improvement in short-term prices.
