Farm footing solid, Fed says

Kiwi farmers are using strong returns to pay off debt and invest. The latest Federated Farmers Banking Survey and Reserve Bank data shows national agricultural lending has fallen by $1.4 billion over the past year.

Auckland Federated Farmers president, Rosemarie Costar says farmgate prices have allowed farmers to borrow less while preparing for future challenges. This includes farmers across Franklin, the Onewhero local told the Times.

“There’s been a lot of debt repaid, which has put them in a position of having much stronger balance sheets. It’s important because you have to be prepared to weather the next storm or drought, or whatever issues are to come.”

Based on responses from almost 540 farmers, the survey also found that relationships between farmers and banks are continuing to improve, with satisfaction levels rising to 69 per cent – a record high in the survey’s eight-year history.

“Banks understand farming, they know it’s very cyclical and how you can have a good year but next year may not be fantastic,” Costar says.

“When the pressure is off a little bit, because you’re able to pay off debt, it certainly makes things easier.”

Farmers are benefiting from better farmgate prices and a Fonterra payout, Feds’ banking spokesperson, Mark Hooper says.

“A capital redistribution of $2 per share to Fonterra suppliers, combined with record beef and sheep farmgate prices, has likely allowed farmers to meaningfully reduce loan principal.”

Positive signs for dairy and livestock are offset by tough times for growers.

“The outlier is arable farms,” Hooper says. “That sector is in near-crisis mode, with weak grain prices, rising costs, tough growing conditions and competition from lower-cost imports.”

Of added concern is Waikato Regional Council’s proposed Plan Change 1 (PC1). As previously reported, PC1 relates to water use in the Waikato, but it could also have a knock-on impact on Franklin growers too.

PC1 has growers on both sides of the Waikato border unsure about the future, Costar says.

“We talk about a cost-of-living crisis, well no one wants vegetables to become any more expensive.”

Despite challenges, overall reduction in debt shows farmers are making sensible financial decisions, making hay while the sun shines.

“It shows people are being wise with their money and paying off debt,” Costar adds.