Survey shows Kiwi farmers feel supported by banks
Federated Farmers of New Zealand, New Zealand’s biggest rural lobby group, have released a survey that shows Kiwi dairy farmers are pretty happy with their banks.
Only 6.6% of dairy farmers said they feel undue pressure from their bank over their mortgage. Only 3.1% of farmers said they are unhappy with the communication they receive from their bank.
This is amazing, given that most have had to borrow large amounts because of sustained losses across the industry. The survey shows banks are providing much-needed support to their farmers during this period of desperately low prices.
Beyond the dairy industry, the level of banking dissatisfaction is even lower for all farming industries together. Just 5.2% of farmers are dissatisfied with their mortgage, and 5.5% say they have come under undue pressure. 3.5% overall are unhappy with their bank’s communication.
The survey was conducted the week after Fonterra’s forecast announcement on 7 August of Farmgate Milk Prices for 2015-2016 at a shocking low of $3.85 per kilo of milk solids, compared to $6 per kilo in 2014-2015. 1,300 farmers around New Zealand completed the Banking Survey, and over half of these were in the dairy industry.
Federated Farmers President Dr William Rolleston says they undertook the survey because it was vital the industry knew whether or not farmers were receiving enough financial support. He said, “The support of banks is absolutely critical in these market conditions. They have the ability to make a significant difference to farmers, the industry and the economy if they take a long-term view.”
The New Zealand Bankers’ Association said it was helpful to have the survey confirm that banks are working appropriately with dairy farmers to help them get through these tough times.
Federated Farmers pledged to follow up the farmers who said they felt under pressure from their bank, and urged banks to stand by the dairy industry. They plan to repeat the survey in November to track any progress.
Clearer budgets still needed for a clear future
One worrying trend uncovered by the survey was that farmers in New Zealand are currently not budgeting for their reduced circumstances. 25% of dairy farmers and 33% of all farmers do not have a detailed budget for the current season.
President Rolleston said this was “not entirely surprising”, as more than 10% of farmers did not have a mortgage and had very low levels of debt. However, he urged farmers, “Particularly in difficult market conditions, it is important to review your budgets and obtain expert advice from your bank, accountant and farm advisor.”
CEO of NZ Banking Association, Mr Kirk Hope, said, “Two-way communication in times of financial stress is essential, and the survey overwhelmingly shows that’s happening on the ground. This helps farmers facing challenges to act early and have a plan and a budget in place, which is what’s needed to get through.”
More than 10% of dairy farmers have taken up Fonterra’s offer of an interest-free loan of 50 cents per kilogram of milk in the first week. Fonterra is expected to lend farmers over $400 million (NZD) in 2015-2016. It is expected that loans will not be repaid until the Fonterra payout rises above $6 per kilo of milk in 2016 or later.
For a breakdown of the survey results by region and farming industry, read the Federated Farmers full survey results.