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OPINION: The Feds' latest banking survey shows that bankers are even less popular with farmers than they used to be, despite falling interest rates, and the report still paints a damning picture of rural lending.
The survey of more than 600 farmers conducted in November shows only 53% of respondents are currently satisfied with their banking relationship.
"That’s a huge drop from 80% in 2017 and raises some serious questions about their behaviour," Federated Farmers banking spokesperson Richard McIntyre says.
"We’re incredibly concerned by the rapid deterioration in farmers’ relationships with their banks and hope this will face some real scrutiny during the banking inquiry."
The Federated Farmers report shows that one in four farmers continue to feel undue pressure from their bank, with dissatisfaction highest among sharemilkers at 35%.
Only 55% rated communication from their bank as good or very good, continuing a downward trend from a high of 80% just a decade ago.
Alarmingly, almost a quarter of farmers feel their bank doesn’t allow them to structure their debt efficiently. 11% report being asked to use overdrafts for capital projects.
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"That’s really concerning and will be adding a lot of unnecessary financial stress for farming families across the country," McIntyre says.
"Forcing farmers to use their overdrafts for capital spending doesn’t just drive up interest costs for the farmer; it also unjustifiably drives up the profit for the bank.
"That kind of behaviour is totally unacceptable. Overdraft facilities are designed for short-term cashflow management, not longer-term investments."
According to the survey both ASB and Westpac were the most likely to make such unreasonable requests of their farming clients.
"This kind of poor and indefensible behaviour from banks has a real impact on farmers’ wellbeing," McIntyre says.
"Of those we surveyed, 33% said their mental health and wellbeing has been negatively affected through their interaction with the banks."
While the report shows continued poor performance and behaviour from many of the banks, there are still some strong performers.
Rabobank, with 23% of market share in rural banking, outstrips all the other banks in terms of satisfaction rates among farmers, at 70.1%.
Rabobank and ANZ also rate much better than others in terms of their flexibility for farmers to structure their debt.
"Those strong results from Rabobank and ANZ may be a silver lining, but there are clearly still some systemic issues in rural banking," McIntyre says.
"There is a real squeeze on agricultural lending at the moment and it’s getting harder every year for farmers to access the capital they need to run their businesses."
Reserve Bank figures show that lending to the farming sector is currently at $62.9 billion, up slightly from $59 billion in 2016.
"It might look like an increase on paper, but when you adjust that 2016 figure for inflation, it would be over $76.3 billion in today’s dollars," McIntyre says.
"What that means is that in real terms agricultural lending has decreased by $13.4 billion, or nearly 25%, since 2016.
"With constantly increasing costs and compliance, and a decrease in capital available from banks, it should be no surprise farmers are feeling squeezed."
