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Farmers expect to cut debt, boost spending

NZ Newswire logoNZ Newswire 13/03/2017 Rebecca Howard

For the first time in two-and-a-half years, New Zealand farmers expect their on-farm spending to increase and farm debt to reduce as profitability improves, a Federated Farmers survey showed.

Farmer optimism has largely increased after global dairy prices have improved on the back of tighter global supply, however Federated Farmers president William Rolleston warned the overall results mask differences between sectors.

"This is good news but the improvement in confidence is fragile. The result was influenced heavily by dairy farmers who saw big increases in dairy commodity prices in the second half of 2016, which have since come back a bit," Mr Rolleston said in a statement.

He noted the ANZ Commodity Price Index for dairy was up 41 per cent in New Zealand dollar terms from July to December, which enabled dairy giant Fonterra to increase its milk price forecast for the current season to $6 per kilogram of milk solids.

"In contrast, the ANZ Commodity Price Index for meat, skins and wool went down 6 per cent over the same period. Sheep and beef cattle numbers have also continued to fall due to economic factors and the lingering impacts of drought in some areas," he said.

The net score from the Federated Farmers mid-season Farm Confidence Survey shows that farmers expect their on-farm spending to increase. According to the data, the net score moved from -27 per cent in July 2016 to +2.5 per cent in February 2017.

Dairy farmers are the most confident, with 17 per cent more farmers saying that their spending will increase in this survey compared to the July 2016 survey.

Regarding debt, the net score is -15 per cent as 31 per cent expect debt to reduce this coming year, 40 per cent expect it to remain the same and 16 per cent expect it to increase. The proportion of farmers foreseeing a reduction in debt is up from 14 per cent in July 2016.

For the first time in three years, farmers' confidence in the profitability of their farms is positive.

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