Banks put screws on farmers

Federated Farmers vice president Andrew Hoggard says rumours about the actions of some banks are swirling around the rural community and farmers are concerned about what this may mean for them short and long term.

He says he’s heard about contract milkers and lower order sharemilkers being refused overdrafts and of a succession plan being vetoed by a bank at the last minute. 

Rural professionals have told Dairy News of banks giving the ag sector a wide berth on lending. One bank is said to have ceased all lending to the ag sector and others have pulled back massively or are much tougher about granting loans. 

Investigation by Dairy News suggests that Rabobank is the only bank not cutting back on lending to the ag sector.

Hoggard says he’s trying to grapple with the issue and decide what action farmers should take.

“The present situation creates a whole series of challenges, especially when you look at all the expectations coming in the form of policies on climate change and fresh water. If farmers are to respond to these issues they may need to invest in infrastructure and if no one is interested in loaning them the money to do that they are locked in a bit of a hard place.”

Hoggard says the challenges facing farmers are prompting many to look at quitting the industry. But if the banks are not lending to people who might want to buy their farms that creates further issues for some would-be sellers.

“So the question for those wanting to sell is whether they will get the price they expect or are they going to have to hold on for years until the market settles down and they can walk away without having to take a bath. This is the perfect storm with multiple challenges happening at the same time.”

A recent survey by Federated Farmers shows that the proportion of its members feeling pressure from banks has risen in the last six months from 16% to 23%.