More NZ farmers feel under financial pressure as bank satisfaction declines

Tuesday 5th June 2018

More New Zealand farmers are feeling under financial pressure and satisfaction with banks has slipped, according to the latest Federated Farmers' Banking Survey.

The number of farmers who said they were ‘very satisfied’ or ‘satisfied’ with their banks slipped to 79 percent in May from 81 percent in November, according to the biannual survey. The decline was led by sharemilkers whose satisfaction level fell to 68.5 percent from 77 percent, although the drop was mainly driven by more people having a neutral perception rather than being dissatisfied, the farming group said.

The number of farmers who said they experienced ‘undue pressure’ from their banks increased to 9.6 percent from 8.1 percent. Federated Farmers said the rise is mainly due to dairy farmers where the measure increased to 13.8 percent from 10 percent, as the reading for sharemilkers rose to 13.5 percent from 9.7 percent. However, the farming body noted this pressure is still less than experienced in 2016 when one in five sharemilkers felt undue pressure.

Federated Farmers vice-president Andrew Hoggard said while the average mortgage across agriculture has decreased in the past six months, for dairy farmers it had increased to $5.1 million from $4.6 million, the highest level since the surveys began in August 2015.

"Dairy holds two-thirds of the total agricultural debt of around $61 billion, and a growing proportion of that dairy debt is held by highly-indebted dairy farms," he said.

In its report on New Zealand's financial stability the Reserve Bank last week noted that most dairy farms are currently cash-flow positive, but remain vulnerable to any possible downturn in prices and agriculture shocks. "Reducing this bank lending concentration risk requires more prudent lending practices," it said.

The Federated Farmers survey drew 1,004 responses, more than double that of the last survey in November and the farming organization warned the result may be a reflection of the profile of those who took part in the May survey compared to November participants.

(BusinessDesk)

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