Some banks are pressuring Northland farmers struggling with the low milk payout to sell their farms with high debt levels, even though they have not missed a single repayment over the years.

At least eight farms throughout the region, particularly in Kaipara, are in danger of being sold if their owners do not come up with a repayment plan that is acceptable to their lenders, farming leaders have told the Northern Advocate.

The financially-beleaguered farmers have enlisted the help of Farmers of New Zealand to try and thwart the foreclosure of their farms they had lived on for many decades. Foreclosure is the legal process that banks use to get back some of the money they loaned when a borrower cannot repay the loan.

A dairy farmer from Waiotira, 32km south west of Whangarei, received a letter from his bank two weeks ago asking that he submit a plan by the end of October on how he would meet his repayment.


"I had a feeling in late autumn when milk prices started falling in the dairy auctions that my bank may act but I hope I'll be able to salvage my farm, although it's going to be a challenge," said the farmer, who did not want to be named as he was still in talks with his bank.

He worked as a sharemilker for 11 years before buying the farm eight years ago. The dairy farmer, who has not missed any repayments, attributed his present financial situation to the low milk payout and having to buy shares in Fonterra.

"I initially bought about 53,000 shares and last February I had to buy another lot and I am buying another lot in December and being a co-op you have to buy these shares."

He said if the dairy prices improved before the year was out, they would not increase by much.

Farmers of NZ operations manager Bill Guest said the debt of those pressured to sell their farms ranged between $1.5 million and $5 million, with varying levels of stock.

"Banks can simply say they won't roll over the farmers' current mortgage terms because they perceive the long-term prognosis is no good and the debt is too high. What is happening is just the start," Mr Guest said.

He said Friday's announcement of a revised forecast milk payout of $3.85 per kg of milk solids would further worsen the situation for farmers.

Auckland lawyer John Waugh is acting for a number of farmers in Northland facing foreclosure - he said many farms were now simply financially unsustainable.

Banks only took action when they were contractually entitled to do so and they exercised their rights under the Property law Act.

"I have seen banks place maturing term debt facilities 'on demand' and then make demand for repayment even though the mortgagor has met all payment obligations. The bank is contractually entitled to do that but it appears to be harsh. Typically in these cases the bank has reached a view that the debt levels are too high - even though of course the same bank was the lender," he said.

ANZ said it was working with its dairy producer customers throughout the country to help them through this low price period and position their businesses for the future.

ASB is not currently progressing enforcement on any farms in Northland. BNZ was not prepared to discuss the specifics but said it worked with its customers by tailoring solutions to their needs on a case-by-case basis.

The other banks had not responded by edition time.