A Lincoln University study surveyed more than 400 farmers and found the majority of farms are financially strong.
The study was carried out by academics Bruce Greig, Peter Nuthall and Kevin Old and concluded it is “highly likely” farmers would survive most price downturns and the impacts of global warming.
“An assessment of the financial resilience of New Zealand farms is particularly important given changing weather patterns stemming from global warming may exacerbate supply shifts, and the opening of world markets through trade agreements could lead to fluctuating supply and demand, all increasing price volatility,” said Associate Professor Nuthall.
However, the results showed most farmers and their farms are in “a zone of stable functioning in which they can operate and absorb financial shocks in at least the short term”.
“Profit levels are not high relative to the investment, but this has been the case for decades and has not caused problems due to farmer and farm family resilience,” he said.
“This does not mean some farmers have not struggled financially, particularly over periods of low payouts, including low wool prices, and periods of severe drought.”
He said new farmers with high initial debt will have found it difficult to meet their commitments in these periods.
“The majority, however, have had the equity to cope, especially the significant numbers with 100 percent equity.”
Figures from the reseach article:
– Farm equity is, on average, nearly 82 percent.
– 62 percent of fruit/viticulture operations have 100 percent equity but this ranged down to 10 percent of the dairy farmers having 100 percent equity.
-12.8 percent of farms had at least $8 million debt, and on the other side of the ledger, 12.2 percent had an asset total of greater than $20 million.