Some dairy farmers should be having trouble sleeping at night according to the Ministry for Primary Industries' pastoral farm monitoring report, which says rural debt has risen from $46 billion to $50 billion, dairy farmers owing $33 billion of that.
Farmers of New Zealand spokesman Bill Guest said it wasestimated that "hard core" debt totalling around $20 billion was owed by 2200 farmers, an average of $10 million per farm, who were already highly vulnerable given Fonterra's final payout prediction of $5.25 per kilo of milk solids.
Even that figure was now looking unrealistic, he said, and half the country's dairy farmers could be looking at failing to break even after paying farm working costs and interest.
On-farm costs averaged $3.80 per kilogram.
Mr Guest recalled that 500 farmers "went to the wall" when David Lange's Labour government introduced its free market reforms in the 1980s, losing their farms in mortgagee sales. Farmers marched on Parliament and picketed banks, and there was general outrage over interest rates of 20 per cent-plus. It was debt rather than high interest rates that were behind the financial crisis now facing farmers, however.
"The papers are full of farms being forcibly sold up and farm company liquidations," Mr Guest said.
"One has to question the banks' responsibility for this current 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.
"One has to question, have the banks today been irresponsible in the way that the old lending criteria have been thrown out the window? 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 that did not extend to providing direct Government assistance to farmers now facing foreclosure.
"It is clear that the government does not view itself as the people's safety net," Mr 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 New Zealand could provide professional services.
