Federated Farmers says financial pressures on farmers are likely to intensify, and mandatory debt mediation will be an important tool in the years ahead.
Tougher environmental policies and regulations, the impacts of trade wars and geopolitical instability on commodity prices, and the Reserve Bank's proposed bank capital requirements, to name a few, will impact farm balance sheets, Feds Vice-President Andrew Hoggard told the Primary Production Select Committee this morning.
Federated Farmers strongly supported the Farm Debt Mediation Bill, with Hoggard telling the committee members there would be a greater need for farmers, their banks and other lenders to work constructively to manage the challenges coming down the line.
"Federated Farmers supported the intent of last year's Members Bill for Farm Debt Mediation Bill and we thank New Zealand First for introducing it in the wake of the Mycoplasma bovis response."
• Sharemilkers back affordable farm debt mediation
That bill was later withdrawn and the new, strengthened Government Bill was much improved, Hoggard said.
However, Federated Farmers sought changes, including that mediators be experienced not only in mediation but also in the agricultural and rural sectors; that the cost of mediation was not a barrier to farmers taking it up; and that an enforcement certificate should not be granted to a creditor until the farmer had either formally rejected mediation, or not attended mediation in good faith.
Federated Farmers said in a statement it was clear from questions at the select committee that MPs were pondering at what point compulsory mediation should be triggered.
Read more from Federated Farmers here.
Farm receiverships and mortgagee sales were end points of farm/bank disputes and were relatively rare.
Earlier bank enforcement action such as calling up an overdraft or insisting on a significant loan principal repayment could put a farmer under intense pressure.
The Bill proposes that farmers can request mediation at any time, but a bank can decline.
Federated Farmers said it would like to see a provision that a bank could not decline mediation, unless the farmer's request was unreasonable.
Costs on farmers, including from new and impending regulations and taxes, were clearly causing some banks to wind back their interest in the agricultural sector, Hoggard said.
Farmers who had contacted him were "being shuffled around" from bank manager to manager, or just to a call centre.
For some farmers it was at the point where "they don't view the bank manager as an integral part of the team any more, just someone to dread a phone call from".