Confidence among New Zealand's farmers slipped further in the first quarter, as global recession and falling commodity prices weighed on sentiment, a survey showed on Monday. The Rabobank survey of 450 farmers showed a net 6 percent respondents believed the rural economy would deteriorate over the next 12 months, compared with a net 3 percent pessimism level in the previous survey in December.
The survey pointed to a levelling out in negative sentiment, but uncertainty over commodity prices remained the key influence. Agriculture accounts for more than a third of New Zealand's NZ$40 billion ($23 billion) in annual export earnings. "It appears to be a case of 'a glass half full or glass half empty' when it comes to commodity prices," said Rabobank general manager Ben Russell. Almost equal numbers of respondents cited commodity prices as either the main reason for their pessimism or for their optimism, he said.
The Reserve Bank of NZ central bank cut interest rates by half a percentage point last week to a record low 2.5 percent, and has pledged to hold them at or below that level until the latter part of 2010. The New Zealand economy has been in recession since the start of 2008, and the slowdown, the longest and deepest in more than 30 years, is expected to continue through much of 2009.
The New Zealand dollar has bounced off the six-year lows seen in early March and is now just 1.7 percent lower so far this year. A stronger currency makes New Zealand exports less competitive on world markets and reduces the prices farmers receive. Sheep and beef farmers were generally more confident than the previous survey because the fall in the currency and improving demand were seen as offsetting the fall in prices.
Dairy farmers were more subdued because of an expectation of volatility in world markets and prices. Last week, the New Zealand based Fonterra Co-operative, the world's biggest dairy exporter, raised its forecast payout to its 11,000 farmer suppliers by 2 percent to NZ$5.20 a kilo of milk solids for the current season.
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