11 Mar 2016

Farmer decries bank debt stance

10:08 am on 11 March 2016

A dairy farm in the family since 1855 is in receivership, with its owner saying debt is the real problem and he's just the tip of the iceberg.

Alex Benton is fighting a losing battle to keep the land his family has been farming for more than 160 years and says the bank was taking the opportunity of the lower dairy payout forecast to cut back its rural lending.

He said he had been paying Rabobank interest rates ranged slightly over 9 percent on a loan for irrigation that was $4.7 million by December, and was closer to $4 million today.

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Photo: 123rf.com

He said the farm had last been valued at between $5.5 million and $5.7 million.

Just two years ago, milk solids were earning farmers over $8 a kilogram.

The price is now forecast to be $3.90.

"If you look at farm's cost of production we are able to - in terms of dollar per kilogram of milk solids - we're able to run this farm at $3.90 a kg costs and with the potential of the farm's being irrigated it's possible to bring it down to $3.50," said Mr Benton.

He said the problem for the farm was that the irrigation contract and the costs of getting the irrigation consent have accumulated a large amount of debt.

"And that debt is the real issue, it's not to do with the operational side of the farm. So at the moment we've been paying quite high interest rates for a long period of time. And been in a dispute with Rabobank since 2012.

"It's not an easy thing to do. It's not an easy thing for any farmer to do at the moment with the present environment but it is achievable."

He said he didn't have a problem with most of the bank managers, and one particularly had been helpful from the beginning, but he thought the banks were not being open or honest with their customers.

"Probably Rabobank is overexposed in the agricultural sector and it's decided that falling dairy prices is an opportunity for it to clean up its loan book. And I don't agree with that."

He sought help from the government, and despite letters from Minister of Primary Industries Nathan Guy and the Prime Minister's office, had no success.

"But I do suspect that we're really seeing just the tip of the iceberg and most of the banks are sitting and waiting to see who will go first and who will take the heat. In my case, obviously I'm facing that with Rabobank today."

Mayors see light on the horizon

Meanwhile, mayors of several rural districts said many farmer would struggle to stay afloat, but that good times would eventually return with booming prices in other sectors providing a cushion.

South Taranaki mayor Ross Dunlop said he was aware of how fast things could change in the industry.

"A month or so ago I was talking to a tractor salesman and he said that February 12 months ago was his best month ever for sales and then this February was one of his worst months ever, Mr Dunlop said.

Opotiki mayor John Forbes said the drop meant a lot multiplied over many thousands of farms.

"You take billions of dollars out of our economy, that has got to hurt," he said.

"A lot of our retail, a lot of the servicing of the farming of the dairy industry will suffer.

"If it goes on long enough, there are jobs being lost, our schools get impacted, a whole lot of things start happening."

Mr Forbes said his region had other sectors to fall back on - less so Waikato, where district mayor Allan Sanson said farmers were doing what they could to get by.

"But farmers are pretty resilient and one thing I have always said is that bank managers do not like milking cows so they will leave the farmers where they are and they will support them as much as they can to keep them going."

Mr Sanson said some farmers used the high payouts of the past to pay down debt, and this had given them a cushion. He thought farmers would come out of it eventually.

"I think the burgeoning global population and the demand for food in the long or medium term is very positive for the dairy industry and any other food products.

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