Farmer com­fort with banks drops as the pres­sure rises

Bush Telegraph - - Focus On Farming -

MORE FARM­ERS are feel­ing un­der fi­nan­cial pres­sure and sat­is­fac­tion with their banks has slipped, the May Fed­er­ated Farm­ers’ Bank­ing Sur­vey shows.

The bian­nual sur­vey drew 1004 re­sponses, more than dou­ble that of the last sur­vey in Novem­ber. While re­sults in­di­cate the vast ma­jor­ity of farm­ers are still sat­is­fied with their banks, those say­ing they were ‘very sat­is­fied’ or ‘sat­is­fied’ fell from 81 to 79 per cent since Novem­ber.

The fall was pro­nounced for sharemilk­ers (77 to 68.5 per cent sat­is­fac­tion) although, for them, the drop was mainly driven by more of them hav­ing a neu­tral per­cep­tion rather than be­ing dis­sat­is­fied.

Per­cep­tions of ‘un­due pres­sure’ have also picked up, from 8.1 per cent in Novem­ber to 9.6 per cent in May. The in­crease is mainly down to dairy, where the in­crease was from 10 to 13.8 per cent (with sharemilk­ers ris­ing from 9.7 to 13.5 per cent). How­ever, this pres­sure is still less than ex­pe­ri­enced in 2016 when one in five sharemilk­ers felt un­due pres­sure.

Fed­er­ated Farm­ers vi­cepres­i­dent An­drew Hog­gard said while the av­er­age mort­gage across agri­cul­ture has de­creased in the past six months, it’s up from $4.6 mil­lion to $5.1m for dairy — the high­est level since the sur­veys be­gan in Au­gust 2015.

“We need to be care­ful in­ter­pret­ing th­ese fig­ures. It may just be a re­flec­tion of the pro­file of those who took part in the May sur­vey com­pared to Novem­ber par­tic­i­pants,” he said. “But it’s a fact that 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.”

The Re­serve Bank re­leased its six-monthly Fi­nan­cial Sta­bil­ity Re­port this week and con­tin­ues to view dairy debt as a fi­nan­cial sta­bil­ity risk.

“On the pos­i­tive side, the Re­serve Bank ob­served that bet­ter and more sta­ble dairy prices mean most dairy farms are cur­rently prof­itable, al­low­ing some farms to re­pay some debt,” Mr Hog­gard said.

“But it warned dairy farm­ing re­mains highly in­debted and vul­ner­a­ble to any fu­ture down­turn in dairy prices. It iden­ti­fied My­coplasma bo­vis as an emerg­ing risk with po­ten­tial to neg­a­tively af­fect pro­duc­tiv­ity and prof­itabil­ity, and noted that dairy faces long-term chal­lenges, in­clud­ing the im­pact of re­sponse to en­vi­ron­men­tal con­cerns, such as stricter reg­u­la­tions.”

New Zealand Bankers’ As­so­ci­a­tion deputy chief ex­ec­u­tive Antony Buick-Con­sta­ble was pleased the sur­vey showed most farm­ers re­main sat­is­fied.

“Banks work closely with their agri clients, through good times and bad. Keep­ing the lines of com­mu­ni­ca­tion open is crit­i­cal to the on­go­ing suc­cess of farm­ers and their banks.” The sur­vey, con­ducted by Re­search First, also showed in­ter­est rates ap­pear broadly sta­ble, although sharemilk­ers con­tinue to pay higher rates than farm own­ers, re­flect­ing the fact they don’t have the same lev­els of se­cu­rity. Just un­der a third of ‘all farms’ re­ported hav­ing de­tailed and up-to-date bud­gets but as usual sharemilk­ers fared bet­ter, with two-thirds hav­ing that bud­get in place.

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