As well as laying out its new strategy, Fonterra should make clearer how it got into this trouble, says Federated Farmers national vice-president and dairy farmer Andrew Hoggard.
The objectives of the bill are: to support farmers in financial distress in their dealings with secured creditors, in particular banks; to enable options to be explored for turning around a failing farm business; or at last resort to enable a farmer with an non-viable business to ‘exit with dignity’.
The scheme applies to all farm businesses solely or principally engaged in agriculture including sharemilking, horticulture and aquaculture, but not to lifestyle farms or forestry.
Richard McIntyre told Dairy News that Federated Farmers recent banking survey showed more farmers coming under pressure from banks. So having a mediation step prior to possible receivership would reduce stress on farmers.
“Talking is underrated as a way to getting a solution. But getting both parties to the table with a mediator to talk through the process is hugely beneficial. Hopefully this will result in a more productive outcome.”
McIntyre says a big stress in these situations is fear of the unknown, so if a pathway can be plotted and expectations made clear it’s got to be good. Even if a farm has to be sold in the end, farmers will value the chance to discuss the options.
He says sharemilkers, especially lower order sharemilkers and contract milkers, feel particularly vulnerable when their incomes are affected by things beyond their control such as Mycoplasma bovis and bad weather.
“They usually have very low equity relative to their loan and so they are reasonably high risk to the bank.”
McIntyre says he knows of a case where a bank with little or no warning came down hard on a sharemilker. People in banks sometimes don’t know the implications of their decisions, especially if they are made very late in a season when people are about to change farms, he says.
The Bill meets a need for good two way communication, McIntyre says. And although Labour introduced it, credit is due to NZ First which has promoted this idea for several years.
Agriculture Minister Damien O’Connor also praises NZ First, in particular Mark Patterson who some time ago introduced a private members Bill on this issue.
“Mr Patterson has been a strong advocate for farmers and should be congratulated for his initial Bill. It has since been reworked and reintroduced as a coalition government piece of legislation.”
O’Connor says the failure of a farm business can lead to the farmer and their family losing both their business and their home.
• The Bill applies to all secured creditors, both banks and secondary lenders, and has broad support from all the major New Zealand banks
• The estimated cost to set up the scheme is $350,000, and the estimated annual cost for administering it is $250,000 to $300,000
• Each mediation will cost about $6000 and be split between the lender and the farmer
• Farmers and creditors have up to 60 working days to complete the mediation, once started
• The independent mediators will have strong understanding and experience of the rural sector
• At the end of the mediation process an agreement will be produced and must be agreed to by both sides and is binding.