Banks easier on farmers as debt pressure subdues
Farmers carry a lot of debt with 80 per cent of them having mortgages, the average value of each being $2.8 million.
The good news is they are feeling less pressure from banks compared with last year, as the outlook for the rural sector improves.
The latest Federated Farmers banking survey shows that 8.5 per cent of farmers reported coming under ‘‘undue’’ pressure from their bank over the past six months, down from 9.6 per cent in November last year.
About 10 per cent of dairy farmers reported undue pressure, which is down from 12.8 per cent, while the drop for sharemilkers is from 15 down to 10 per cent. Of meat and fibre and arable farmers, 6.9 per cent reported undue pressure, down from 8.2 per cent.
Vice president Andrew Hoggard said while the mortgage numbers appeared hefty, farmers were investing in a business which offered a return compared with people buying a house. But he cautioned farmers to make sure they used debt wisely and take out loans for productive assets.
‘‘In the early days I was investing in cows, now my main assets are the land and what the animals earn off it . ... Without the debt I would never have got to where I am.’’
With many if not most farmers today, they never paid off their mortgages while they were working. ’’A lot of farmers are indebted until they retire and then it’s cash flow time. If you use the debt wisely and keep it in a sensible range, I don’t think it’s such a bad thing.’’
Dairy farmers, whose average mortgage is $3.7m, are more indebted than sheep, beef and arable farmers at $2m. More dairy farmers (85 per cent) have a mortgage than non-dairy farmers (73 per cent).
The survey shows ANZ is the single largest lender (to almost 35 per cent of borrowers), followed by Rabobank (19 per cent), BNZ (17 per cent), ASB (15 per cent), Westpac (11 per cent) and others under 5 per cent.