Feds in gun over swaps deal

Some Federated Farmers Dairy executives are unhappy with the board’s stance on the issue. President Bruce Wills has come under fire for saying farmers should take responsibility for their own actions.

Delegates at the Feds Dairy Council meeting last week in the Bay of Islands called for greater support for affected farmers. Some described Wills’ comments as negative.

A remit, moved by West Coast Dairy president Richard Reynolds, saying the council did not support the board’s position on swaps was passed at the council meeting. It urged the board to push for an inquiry.

Wills says in November last year it asked the Commerce Commission to look into swaps and how they were sold. “It is fair to say we have received a number of inquiries from members and even non-members regarding swaps.

“Speaking as a former banker [I can say] swaps are incredibly complicated instruments.  Certainly you only go into them after independent advice to ensure they are appropriate to your needs. The issue is less the product and more the way they were sold, hence [our request to] the Commerce Commission.”

The swaps were sold in 2006-07 by some banks to farmers as insurance against interest rates – and hence floating-rate farm mortgages – rising rapidly, farmers say.  But when interest rates dropped, the farmers who had bought the swaps were left locked in to high interest rates they could not escape without paying hefty break fees. Already heavily indebted, some farmers lost their farms because of the swaps.

A Commerce Commission spokeswoman told Dairy News it had received complaints. “We are making an assessment of the information received. No decision has been made regarding a full investigation.”

Reynolds says though farmers were responsible for signing swap agreements with banks, he wants a Commerce Commission inquiry into the way the product was sold. 

“Any inquiry should look at the pressure placed on farmers to accept swap. Back then banks were coming to farmers telling them they had high equity and should borrow more.”

Taranaki Dairy president Derek Gibson says one farmer in his region was paying $7000 extra interest every month under the swap agreement.

“The issue is causing concern among members and we are getting calls from farmers. While we are not seeking financial help, we want an inquiry to look at the way banks were signing on farmers for swaps. Farmers believe they were duped.”

Feds Dairy chairman Willy Leferink believes about 50% of dairy farmers have signed up for swaps.