Wednesday, 11 December 2019 09:23

The good, the bank and the ugly

Written by  Staff Reporters
Signs of banks being more cautious were obvious at this year’s National Fieldays. Signs of banks being more cautious were obvious at this year’s National Fieldays.

OPINION: The news that most banks are pulling back or taking a more cautious approach to lending to the rural sector should come as no surprise.

The signs were obvious at this year’s National Fieldays.

Normally banks are out selling debt for all they’re worth, but this year they had retreated inside their much smaller sites, mostly showing the flag to a few key clients and checking the mood of the event.

The Reserve Bank’s move to get banks to increase their capital reserves, to protect bank deposits, will pressure their ability to lend. The days of banks’ carefree lending are over. 

Anecdotal evidence suggests that before lending on a farm a bank will take a microscopic look at the property and its viability. For example, how compliant is the farm in environmental matters and is the asking price realistic given its likely future? That makes sense.

But the trouble for many farmers is that tighter lending criteria pinch their ability to spend money on necessary new infrastructure such as feed pads or cow homes or better effluent systems.

Dairy News has already heard that bankers’ pressure on some Southland farmers to repay loan principal is forcing them to try to raise profit at the expense of getting on with farm tasks.

With banks squeezing farmers, the Government’s environmental agenda could be at risk, or at least it may face pushback from farmers. 

Farmers’ discretionary spending on environmental improvements will be nudged down their priority lists, or such spending will generally be curtailed, dampening the economies of rural towns. This is not a good outcome because NZ will only maintain its position as a producer of high quality, sustainable food by adhering to good on farm standards. And the reality is that rural NZ is the real NZ.

Banks’ decisions to cut the size of their agri portfolios, and all that this may mean, come as the country moves into an election year. For not the first time farming may be the centre of the debate.

More like this

Junket?

OPINION: The Hound notes that the Taxpayers’ Union recently revealed that the Ministry for Primary Industries (MPI) spent more than $125,000 for its presence at this year’s Mystery Creek Fieldays.

St Paul's cracks it again!

Once again, the sharp minds at St Paul’s Collegiate School in Hamilton were the 2023 Young Innovators of the Year Winners at this year’s Fieldays.

Lip balm wins gong

Once again, the sharp minds at St Paul’s Collegiate School in Hamilton were the 2023 Young Innovator of the Year Winner at Fieldays.

Engines roar, mud flies for charity

The recent presentation of a cheque for $4,500 to the Rural Support Trust, was the result of the Fieldays’ inaugural Tractor Racing Experience that replaced the usual tractor pulling competition.

Featured

Govt urged to reduce ETS units

The Climate Change Commission wants the new Government to reduce NZ Emissions Trading Scheme (ETS) auction volumes as son as possible.

Dairy sheep, goat woes mount

Dairy sheep and goat farmers are being told to reduce milk supply as processors face a slump in global demand for their products.

Alliance's Pure South cuts win gold

Meat co-operative Alliance Group has bagged four gold medals at the Outstanding NZ Food Producer Awards, achieving top honours for every cut entered.

Dairy demand on the rise

There is increasing evidence that dairy demand is on the upswing, according to Rabobank senior agricultural analyst Emma Higgins.

Fert use tumbles as prices spike

Fertiliser use in New Zealand over the 18 months is about 25% down from what it consistently was for the previous decade or more, says Ravensdown chief operating officer Mike Whitty.

National

Waikato dryer sold

An independent milk spray dryer in Hamilton, destined for liquidation, has been bought by a South Auckland goat milk processor.

Machinery & Products

Samasz sets its sights high

Since its arrival in New Zealand, Polish mower manufacturer Samasz, currently celebrating 40 years in business, has carved a niche…

Trojan keeps on going

The DR200 Trojan farm two-wheeler motorcycle was introduced over 28 years ago, when the engineering team at Suzuki New Zealand…

Still going strong!

The saying goes ‘if it ain’t broke -don’t fix it’, so it’s no surprise to see an old favourite in…

» Latest Print Issues Online

Milking It

'A complete dog

OPINION: It's not just a rural banking inquiry that farmers want. Freshwater farm plans are another major headache for farmers.

Action, not words

OPINION: The new Government may be farmer friendly, but it's not love, rather action that farmers want.

» Connect with Dairy News

» eNewsletter

Subscribe to our weekly newsletter