Editorial: Sensible move
OPINION: The Government's decision to rule out changes to Fringe Benefit Tax (FBT) that would cost every farmer thousands of dollars annually, is sensible.
While farmer satisfaction with banks is relatively stable, many more farmers feel under pressure with costs on the rise, according to the new Federated Farmers Banking Survey.
Federated Farmers national president and economic spokesperson Andrew Hoggard says farmers and growers are no different from other Kiwis who were put under pressure by rising inflation.
“For farmers, higher interest rates are coming on top of significant hikes in the cost of other farm inputs, including freight, fertiliser, fuel and labour.”
Hoggard says information from Beef + Lamb NZ’s Economic Service released this week shows on-farm inflation has hit 10.2%, it’s highest point since the 1985-86 season.
“Ultimately, all of this will impact food prices,” Hoggard says.
The Federated Farmers Banking Survey has been held twice-yearly since 2016.
The May 2022 survey drew responses from just over 1,000 farmers from across the country.
64% of farmers surveyed said they were very satisfied or satisfied with their bank relationship. This was down 3 points on the previous survey in November 2021.
Arable farmers were most satisfied of industry groups, while Sharemilkers were the least satisfied, with fewer than half saying they were very satisfied or satisfied, Hoggard says.
14% of farmers perceived they had come under undue pressure from banks over the past six months, up slightly from November. Sharemilkers said they felt the most pressure.
Overall, banks’ conditions for lending became tougher rather than easier for all farm types, with 4% reporting easier conditions and 21% reporting tougher conditions. This was particularly the case for Sharemilkers and ‘Other industry group’ farmers (e.g., deer and goat farmers, beekeepers, etc).
Over the past six months, the average farm mortgage value has increased from $3.6 million to $4.1 million while the median increased from $2.10 million to $2.25 million.
The average mortgage interest rate increased to 4.58% from 3.95% in November, showing the impact of OCR increases on lending rates.
"Last week the Reserve Bank put up the official cash rate 50 points to 2% and signalled more 50-point increases are in the offing. For a farm with a debt of $4 million, a 100-basis point increase in the lending rate translates as $40,000 extra in interests costs a year," Hoggard says.
The May survey showed that overall, 71% of farmers were paying a mortgage interest rate of less than 5%, down from 89% in November. No farmer was paying a rate higher than 10 %, as was the case in November.
Satisfaction with bank communication continued to be stable, although slowly declining over the past five years. 57% said their bank communications had been very good or good, down slightly from November.
Arable farmers rated their quality of communication the highest; sharemilkers were the least satisfied, with fewer than half saying they were very satisfied or satisfied. Those without bank loans were particularly unhappy with communication.
"The comments from respondents show that personal contact from bank staff had declined and most farmers were not happy about it. High staff turnover, rural bank branch closures with consolidation of staff into bigger branches and regional centres, and Covid work policies (e.g., working from home and less able to travel) were all cited as reasons for reduced personal contact," Hoggard says.
Just on 75 percent of farmers had an overdraft facility, similar to November. The average overdraft limit was $283,000, a $102,000 increase, while the median limit increased from $70,000 to $125,000.
Overdraft interest rates also increased, with an average rate of 7.10 % compared to 6.28 % in November. Sharemilkers had the highest average of 7.97 % and Arable the lowest of 6.55 %.
Although most farmers had up-to-date budgets for the current 2021/22 season, fewer farms had an up-to-date budget for the upcoming 2022/23 season, the survey found.
"With the pressures coming on to the sector, farmers would be well-advised to have detailed up-to-date budgets and to be ready to raise any concerns with their banks or financial advisors earlier rather than later.”
Boutique Waikato cheese producer Meyer Cheese is investing in a new $3.5 million facility, designed to boost capacity and enhance the company's sustainability credentials.
OPINION: The Government's decision to rule out changes to Fringe Benefit Tax (FBT) that would cost every farmer thousands of dollars annually, is sensible.
Compensation assistance for farmers impacted by Mycoplama bovis is being wound up.
Selecting the reverse gear quicker than a lovestruck boyfriend who has met the in-laws for the first time, the Coalition Government has confirmed that the proposal to amend Fringe Benefit Tax (FBT) charged against farm utes has been canned.
Holstein Friesian excellence was front and centre at the 2025 Holstein Friesian NZ (HFNZ) Awards, held recently in Invercargill.
The work Fonterra has done with Ballance Agri-Nutrients Ltd, LIC and Ravensdown to save farmers time through better data connections has been recognised with a national award.
OPINION: Dust ups between rural media and PR types aren't unheard of but also aren't common, given part of the…
OPINION: The Hound hears from his canine pals in Southland that an individual's derogatory remarks on social media have left…