Farmers are flabbergasted to learn that Fonterra borrowed money to pay dividends over the last few years.
“Banks are responsible lenders that take a long-term view of the rural sector,” says NZ Bankers’ Association deputy chief executive Antony Buick-Constable.
“They know the vital role farmers play in the economy and that it’s important they succeed.
“Rural bank managers work closely with farmers facing financial challenges on a case-by-case basis to see how they can work together through any issues. This was the situation during the last dairy downturn and the current Mycoplasma bovis outbreak.
“The industry supports farm debt mediation to provide clarity and another option for farmers.
“Last year NZBA began developing an industry-led farm debt mediation scheme but it was overtaken by the government’s proposed initiative, which we support in principle.
“We look forward to seeing the bill and to getting a mediation scheme in place.”
Federated Farmers says the proposed legislation will require creditors to offer mediation to farmers who default on payments before they take enforcement action and it will allow farmers to initiate mediation.
“Federated Farmers is in favour of this,” says Feds vice-president and commerce spokesperson Andrew Hoggard.
“Farmers are especially vulnerable to business down-turns as a result of conditions often outside their control -- weather, market price volatility, pests and diseases like Mycoplasma bovis. Farmers are also facing a raft of policy changes including freshwater management and climate change, and these could apply even more pressure.”
The agricultural sector has nearly $63 billion of debt and the Federated Farmers six-monthly banking surveys have shown that while most farmers are satisfied with their banks, satisfaction has been slipping and the number feeling under pressure has been rising.
“There is no substitute for good communication and we urge farmers and their banks to keep in close touch and build positive relationships in good times and bad, with or without farm debt mediation,” Hoggard says.
Rural Women New Zealand (RWNZ) national president Fiona Gower says rural communities are adversely affected by the imbalance of power between banks and farmers. This bill will hopefully establish a standard process that will bring clarity and ensure farmers are treated fairly by financial institutions, she says.
“Financial control is not black-and-white for farmers due to circumstances beyond their control. [Given] this complexity, creating a stand-alone bill for farmers will provide fair treatment to all involved.”
Agriculture Minister Damien O’Connor says the Farm Debt Mediation Bill, approved by Cabinet last week, will require creditors to offer farmers who default on payments mediation before they take any enforcement action.
“Total farm debt in NZ is $62.8 billion – up 270% on 20 years ago. Farmers are especially vulnerable to business downturns,’’ says O’Connor.
“The Bill is pragmatic. The guts of it is early intervention – where either the farmer or the bank have an ability to go and seek mediation, which is a far better option than forced foreclosure,” he says.
O’Connor says he would encourage farmers and lenders to have their say on the bill during the select committee stage. The scheme will apply to all secured lenders, including non-bank lenders.