NZ Milk Price Could Hit $10/kgMS as Global Supply Eases
A 'tsunami' of milk from key exporting countries is winding down and this may be good news for New Zealand dairy farmers.
Its latest quarterly Rural Confidence Survey – completed late last month – has showed New Zealand farmers are increasingly optimistic about the outlook for both their own enterprises and the overall agricultural sector.
After registering a large rally last quarter, confidence in the overall rural economy remained at high levels, with 54% of farmers expecting conditions to improve over the next 12 months (the same as last survey) and only 6% expecting them to worsen (down from 8%).
Farmers' expectations of their own businesses had also climbed, with 57% expecting their farm business performance to improve over the coming year (up from 55% previously) and only five per cent expecting it to deteriorate (compared with 10% last survey).
Rabobank New Zealand CEO Ben Russell said while spring was typically the time farmer confidence was at its highest, the current favourable climatic conditions, combined with improving product returns across most agricultural sectors, had increased confidence even further this year.
Russell says dairy farmer confidence had remained at similar elevated levels seen in the previous survey, in the wake of a record milk price forecast for the current season (at NZD 8.30/kgMS) and generally very good spring conditions lifting milk production.
"Dairy farmers are reporting the same high levels of confidence we have been seeing in the sector since the middle of the year, with their optimism being driven particularly by high commodity prices, good overseas markets and the current milk price forecast, " he says.
Russell noted while dairy farmer confidence was very high, there was likelihood that dairy commodities prices would ease from record high levels into 2014. "And this is something Rabobank believes should be factored into producers' planning and budgets for next season," he said.
For sheep and beef farmers, more than half (56%) now reported they were expecting the agricultural economy to improve in the next 12 months, up from 52% with that expectation previously.
The number of sheep and beef farmers expecting their own farm business performance to improve also increased, to nearly half (49%), climbing from 45%.
Russell says improving commodity prices were buoying the red meat sector, with lower stock numbers – particularly less availability of lambs – following last summer's drought contributing to the positive outlook for commodity prices among farmers.
"At the start of the new processing season, farmgate prices are two to three per cent ahead of the prior year for lamb," he says.
The Rabobank survey showed New Zealand farmers' investment intentions remained strong, with 94% of those surveyed expecting to increase or maintain the level of investment in their farm businesses (compared with 92%in the previous survey).
