Monday, March 4, 2024

‘Valuable’ advice fund coming to an end

Neal Wallace
Facility has helped scores of financially stressed farmers stay in business.
Reading Time: 3 minutes

A fund that pays for independent advice – and has helped most of the more than 120 financially stressed farmers who have used it stay in business – is coming to an end.

The Farm Business Advice Fund pays for a consultant to provide advice to the farmer and their banker on a farm that is under pressure.

Changes introduced have given banks confidence and prevented most farmers involved from exiting the industry.

The $6000 cost per case has been jointly funded by the NZ Banking Association and the Ministry for Primary Industries through the Rural Support Trust.

It has been praised by the Rural Support Trust and banks, which both report an increase in farmers facing financial stress due to low product prices, high interest rates and inflation.

Banks say more clients are falling behind in their repayments, although numbers are low compared to historical figures.

Rural Support Trust chair Neil Bateup wants the fund to continue.

“It has been a very, very valuable service that has been offered to farmers and we are keen to see it continue.”

The MPI’s director of rural communities and farming support, Nick Story, said the fund was set up in February 2020 as a short-term measure to provide early intervention for financially stressed farmers.

The MPI subsequently agreed to several extensions and has invested almost $400,000.

Story said the establishment at about the same time of the Farm Debt Mediation Scheme, which the MPI funds, encouraged lenders to talk with at-risk clients earlier, often avoiding the need for mediation.

The scheme puts farmers, growers and creditors at the same level to discuss debt issues.

“The fund was always intended to be a short-term measure as the Farm Debt Mediation Scheme was established.”

Federated Farmers board member Richard McIntyre is disappointed the fund is stopping.

He said it offers early intervention by providing financial mentoring and advice. He described the Farm Debt Mediation Scheme as the “ambulance half way down the cliff”. 

NZ Banking Association chief executive Roger Beaumont said the farm business advice support fund has been successful in providing farmers with financial advice.

“The sooner you can talk to your bank about any financial challenges, the more options they’re likely to have to help.”

A combination of pressure from high costs and interest rates and lower product prices, flooding, employment and isolation took a toll on Southland farmers’ mental health at the end 2023 with the Southland Rural Support Trust receiving 31 new cases between August and November.

That was twice as many as in the same quarter a year before.

Nationally, of all new cases handled by the trust from August to November, 40% were from the southern region.

The country’s major lenders say farm budgets are under pressure but the fact that farmers have repaid debt in recent years means balance sheets are generally healthy.

They are working with clients to manage cash flows, extend overdraft requirements and adjust repayment programmes.

An ANZ spokesperson said the farm business advice fund has been a helpful tool as part of a wider toolkit of support options.

ASB rural banking manager Aidan Gent said the impact of a rapid rise in the official cash rate, high levels of farm inflation and subdued red meat prices are contributing to higher levels of financial stress.

Gent echoed the advice of all banks by urging farmers to work with their advisers.

Tim Henshaw, Westpac NZ Head of Agribusiness, said some livestock farmers recorded a financial loss last year and a small number of its clients have fallen behind on repayments over the past year, though the number is historically low.

Some livestock farmers recorded a financial loss over the past year.

“However, most customers have made material debt repayments in recent years while farmgate prices were high and inflation and interest rates low, and they’re well placed to manage their finances through tighter times.”

Dave Handley, BNZ’s agribusiness manager, said debt repayment in recent years means farmers and growers are in a better position to manage their finances in tight times.

Bruce Weir, Rabobank’s country banking general manager, said there has been a small increase in the number of clients experiencing financial difficulty in the past year.

“It is Rabobank’s set practice to stand by our clients in times of adversity, where there are circumstances outside their control, and provide long-term support measures.”

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