Rabobank flags rising global dairy prices, warns of downside risks ahead
While global dairy commodity prices continue to climb in most key exporting countries, the second half of the year is expected to bring increased downside risks.
Farming leaders agree that while farm profitability remains under pressure, there are signs of cautious optimism as we enter 2025.
Beef + Lamb New Zealand chair Kate Acland notes that it's been a tough year for many in the industry, and the upcoming season is also shaping up to be challenging with profitability under pressure and extreme dry conditions affecting parts of the country.
However, there are signs of cautious optimism, she told Rural News.
"The North Island has enjoyed excellent lambing conditions, leading to strong lamb growth. In the South Island, farmers faced prolonged cold, wet weather and snowstorms during lambing but worked hard to minimise potential losses.
"Early-season farm gate prices for sheepmeat are higher than last spring, and cattle prices remain strong. Combined with recent interest rate cuts, this has eased pressure on some farmers.
"These factors, alongside recent policy announcements such as the move to curb farm conversions into carbon farming and new independent advice on methane targets - following advocacy from B+LNZ and others - have brought some certainty and lifted sector confidence."
Rabobank's final quarter Rural Confidence Survey of the year found another lift in farmer confidence - with net confidence reading now sits at +34% (from +3%) - its highest level since mid-2017.
The latest survey, completed late last month, found 47% of farmers (30% previously) were now expecting the performance of the broader agri economy to improve in the year ahead, while the number expecting conditions to worsen had halved to 13% (from 27%). The remaining 38% of farmers expected conditions to stay the same.
Ravobank general manager for country banking Bruce Weir says it is fantastic to see confidence flowing back into the sector after a difficult last 18 months.
"Having battled through a really tough period, farmers are now seeing some light at the end of the tunnel and their mood has noticeably lifted from earlier in the year," Weir says.
"This is great to see as we move into the holiday season and bodes well for a strong year for the sector in 2025."
Federated Farmers dairy section chair Richard McIntyre says restoring farmer confidence has been Federated Farmers main focus for the last two years.
"So, it's really encouraging to see it start to lift from the record lows we've seen in recent years.
"Things hit rock bottom about a year ago and it has taken a little while for that confidence to invest in our business to rebound."
McIntyre told Rural News that their confidence surveys have been telling them that there are some clear drivers for low farmer confidence: banking issues, reduced commodity prices, regulation and compliance costs and rising input costs.
"Essentially it comes down to costs, costs, and more costs. Farmer confidence takes a real knock when there is more money going out the door then they have coming in," he says.
McIntyre says his organisation has focused on cutting some of the cost and frustration out of farming by pushing back on some of the expensive and unworkable regulation affecting farmers.
"Before the election we released a roadmap for restoring farmer confidence that included 12 policy priorities for the Government.
"Full credit to the Government, just a year on they've picked up 10/12 of those policies and ran with them, and I think that will have had a huge impact on farmer confidence."
