Banks to blame for dairy debt

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Some dairy farmers may be sleeping fitfully. So says the Ministry for Primary Industries' pastoral farm monitoring report, which reports rural debt has risen from $46 billion to $50 billion with dairy farmers owing $33 billion of that.

Farmers of NZ spokesman Bill Guest says it is estimated that "hard core" debt of about $20 billion is owed by 2200 farmers, an average of $10 million a farm, who are already highly vulnerable given Fonterra's final payout prediction of $5.25 per kg of milk solids.

Even that figure now looks unrealistic, he says, and half the country's dairy farmers could fail to break even after paying farm working costs and interest. On-farm costs average $3.80 per kg.

Mr Guest recalled that 500 farmers "went to the wall" during the free market reforms of the 1980s, losing their farms in mortgagee sales. Farmers marched on Parliament and picketed banks, and there was outrage over interest rates of 20 per cent-plus. However, it is debt rather than high interest rates that is behind the financial crisis now facing farmers.

"One has to question the banks' responsibility for this farm crisis.

The old Rural Bank guidelines - that you borrowed no more than four times your gross income - debt servicing was limited to 25 per cent of your gross income and the number of farms you could own were monitored by the Land Aggregation Act.

"What were the bank risk managers thinking when bank lending has put 2200 dairy farmers at risk?"

The Government had given New Zealand banks financial guarantees, but not direct Government assistance to farmers now facing foreclosure.

"It is clear that the Government does not view itself as the people's safety net," Guest added. "However, those farmers who believe their banks have not treated them fairly should complain to the Banking Ombudsman and seek professional advice."

Farmers of NZ could provide professional services.

- Hamilton News

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