A new Federated Farmers survey reveals that more farmers are feeling under financial pressure, and satisfaction with their banks has slipped.
While survey results indicated most farmers are still satisfied with their banks, those that had been “very satisfied” or “satisfied” fell from 81 per cent to 79 per cent since the previous survey in November.
Least satisfied in this category were sharemilkers at 68.5 per cent satisfaction, down from 77 per cent.
The biannual survey for May drew 1004 responses, more than double that of the last survey in November.
For sharemilkers, the drop was mainly driven by more of them having a neutral perception rather than being dissatisfied.
Farmers feeling they were under “undue pressure” lifted from 8.1 per cent to 9.6 per cent. This increase is mainly felt in dairying, where the increase was from 10-13.8 per cent, with sharemilkers rising from 9.7 per cent to 13.5 per cent.
Pressure levels are still less than experienced in 2016, when one in five sharemilkers felt undue pressure.
Federated Farmers vice-president Andrew Hoggard said the average mortgage had lifted from $4.6 million to $5.1m among dairy farmers, the highest level since the surveys began in August 2015.
Care had to be taken in interpreting the figures, he said.
“It may just be a reflection of the profile of those who took part in the May survey compared with November participants. 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’s six-monthly Financial Stability Report viewed 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.”
“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 that has potential to negatively impact 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 said the survey showed most farmers remained satisfied with their banks.
“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 also showed interest rates were broadly stable, although sharemilkers continued to pay higher rates than farm owners, reflecting that they did not have the same levels of security as farm owners.
Just under a third of all farms reported having detailed and up-to-date budgets for the season. Sharemilkers did better with two-thirds having a budget in place.
Farmers’ satisfaction with communication from their banks remained stable at about 74 per cent with sharemilkers the least satisfied.
By: GERALD PIDDOCK