Thursday, February 22, 2024

Interest rates lift putting farmers under pressure – survey

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Average mortgage interest rate has increased from 4.59% in May to 6.29%.
Federated Farmers president and economy spokesperson Andrew Hoggard says more than 40% of farmers said they felt their mental wellbeing had been affected by their debt levels, interest rates, changing condition, or other forms of financial pressure.
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Rising interest rates, debt and other financial concerns are squeezing farmers and eroding mental wellbeing, the latest Federated Farmers Banking Survey shows.

Nearly 1200 farming businesses answered questions in the November survey, reporting that their average mortgage interest rate has increased from 4.59% in May to 6.29% – and up from 3.95% in November 2021.

“It’s a reflection of the impact of official cash rate rises and while plenty of other Kiwi households and businesses are also feeling the pinch, many farms are carrying high debt,” Federated Farmers president and economy spokesperson Andrew Hoggard said.

Since the May Federated Farmers survey, the average farm mortgage value has increased from $4.07 million to $4.19m while the median increased from $2.25m to $2.50m.

The average level of overdraft was up $46,000 to $328,800, with an average interest rate of 8.59%.

“It’s not a surprise given those big numbers that just over 40% of farmers said they felt their mental wellbeing had been affected by their debt levels, interest rates, changing condition, or other forms of financial pressure,” he said.

Also released recently was the government’s primary industries Situation Outlook Report. 

It highlighted the boost to the economy from an estimated record $55 billion in food and fibre export returns by June next year.

What did not make the headlines was that farm expenses jumped 15% in the September quarter compared to the September quarter 2021, with rises in fuel (53%), fertiliser (37%) and debt servicing (34%) leading the way.

The survey showed that farmer satisfaction with their bank relationship continues to slip. Although just on 60% of farmers said they were very satisfied or satisfied with their bank relationship, this was down five points from the survey six months earlier, and is the lowest since the biannual surveys began in 2015.

Some 17.4% of farmers perceived they had come under undue pressure over the past six months, up 3.5 points from May 2022, with sharemilkers leading the way (20.7%).

Overall, banks’ conditions for lending became tougher rather than easier for all farm types, with 3.3 percent reporting easier conditions and 26.8% reporting tougher conditions.

“Satisfaction with communication from banks slipped again. 

“That sector might reflect on comments from respondents that personal contact from bank staff has been declining over recent years and most farmers are unhappy about it,” Hoggard said.

“High staff turnover, rural bank branch closures with consolidation of staff into bigger branches and regional centres, and covid work policies have all been cited as reasons for reduced personal contact.”

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