18 Jul 2015

Banks give 'benefit of doubt' to farmers - BNZ

7:45 am on 18 July 2015

BNZ says farm mortgagee sales are increasingly rare and lenders are taking a more conciliatory approach with farmers facing overwhelming debt.

International dairy prices have slumped to their lowest since 2009, with analystics forecasting that they are unlikely to pick up for months.

The size of the latest drop in international dairy prices has taken dairy farmers and commentators by surprise.

The size of the latest drop in international dairy prices has taken dairy farmers and commentators by surprise. Photo: 123RF

Head of agribusiness at the Bank of New Zealand, John Janssen, said less than one percent of the country's 13,000 dairy famers are so heavily indebted they are unlikely to be able to weather the low milk payouts.

He said way banks deal with farmers has matured over the past couple of decades, and that they now give farmers the benefit of the doubt, as to whether to ride out the slump or leave while they still have some equity.

Whangarei dairy farmer Alex Wright said many farmers were in a dire situation and, following comments from Minister for Economic Development Steven Joyce, the Government's view that struggling dairy farmers were resilient was out of touch with reality.

"They talk about farmers being resilient - well, you can be resilient for a certain amount of time, but if you reach the point where you can't function your business because you can't even pay for the basics to run the business, then I feel that the government are just sitting on the fence.

She said the Government should be putting pressure on the banks to act more compassionately towards struggling farmers.

Janette Walker, a negotiator working with heavily indebted farmers, said banks were putting pressure on family members to put up their own properties as guarantees.

She said there was a risk that parents could lose their own homes.

"40 percent of farmers are not going to make any money this year, and probably at the same for the following season. Some of them may have to sell some assets, some of them may have to exit farming."

Ms Walker said banks had been cutting off cashflow for struggling dairy farmers in particular and demanding more security for further loans.

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