Farmers under pressure
Farmer satisfaction with their banks is dropping, and more are feeling they are under financial pressure, the Federated Farmers November Banking Survey shows.
While 73.7 per cent of the 750 farmers who responded to the survey said they were satisfied or very satisfied with their bank, that was a drop of 5 per cent since the previous survey in May. It’s also the lowest satisfaction level recorded in any of the 10 surveys conducted since 2015.
“The results show a need for renewed efforts to improve relationships between farmers and banks,” Federated Farmers Economics and Commerce spokesperson Andrew Hoggard said.
“It also underlines the fact that farm debt mediation — voluntary ideally, but mandatory if necessary — would be a useful tool in the tool kit. We look forward to the Government advancing a Farm Debt Mediation Bill after the original NZ First Member’s Bill was withdrawn a few months back for improvement,” Andrew said.
Bank satisfaction levels remained steady, at 69 per cent, for sharemilkers. One factor may be that average interest rates for sharemilkers dropped from 5.8 per cent to 5.3 per cent, bringing them closer to the average rate for all farm types, at 5.2 per cent.
Dairy farmers, who have the largest mortgages by dollar value, on average experienced a drop in their total dairy debt of about $375,000 to $4,686,000. Sharemilkers’ average mortgages went from $1,022,000 to $1,299,000 in the last six months. More farmers (11.6 per cent) reported feeling “undue pressure” from their banks than at any time since August 2015, though that was only a two percentage point rise between May and November. However, the average increase in undue pressure from dairy farmers went up 4.4 per cent in the six month, and for sharemilkers it was higher, at 5.5 per cent. Nearly a quarter of sharemilkers now feel they are under undue pressure.
“[That] may seem counterintuitive considering dairy farmers’ incomes and profitability have been recovering after the 2014-16 downturn,” Andrew said. “Banks generally stood by their dairy clients and allowed them to increase debt. But now that times are better — notwithstanding a recent drop in milk prices — banks want farmers to pay debt down.”