Fewer farmers say they are feeling undue pressure from their bank but satisfaction rates continue to slide, according to the Federated Farmers November Banking Survey.
Of the 1341 farmers who responded to the survey, which was independently run by ResearchFirst, 65.4 per cent said they were satisfied or very satisfied with their bank relationship - down from 68.5 per cent from the Feds' survey in May.
"Satisfaction has steadily slipped over the past three years - in our November 2017 survey it was 80.8 per cent," Federated Farmers president and commerce spokesman Andrew Hoggard said.
"That's probably no great surprise. Banks have been trying to reduce their exposure to agricultural lending as it is considered 'risky', including by the Reserve Bank."
According to Hoggard, banks put pressure on farmers to reduce their debt when commodity prices were good, "to put them into a better position to weather the next downturn," and there was also a trend by banks to diversify agricultural lending from dairy to other sectors, "especially horticulture."
"As a result agricultural debt has been squeezed down and dairy farming has been bearing the brunt, with dairy debt down almost $2 billion over the past year to $39 billion," Hoggard said.
One bright spot from the November survey was a slight drop in the number of farmers feeling under pressure from banks, from 19.3 per cent in May to 18.4 per cent last month.
A possible explanation was that the further postponement of the Reserve Bank's stiffer bank capital requirements for higher risk margins was trickling down to the trading banks' stance, Hoggard said.
Farmers' bank pressure sentiment peaked at 23.2 per cent in November last year but despite the recent easing in pressure it remained a lot higher than earlier years of the Feds survey, when it ranged from 5 per cent to 10 per cent.
Pressure was highest for dairy farmers (24.9 per cent) and arable farmers (23.3 per cent).
Meat and wool farmers were feeling the least pressure (10.3 per cent).
Despite being less satisfied with bank relationships and bank communication, sharemilkers' perceived pressure was much lower than that for dairy farmers as a whole (12.8 per cent vs 24.9 per cent) and was also well down on levels felt in earlier years of the survey.
"That might be because bank staff are concentrating on farm businesses with higher debt while sharemilkers, who tend to have lower mortgages and overdrafts, are left to be managed by a call centre," Hoggard said.
Other key findings from the November survey
• 61.8 per cent of farmers felt communication with their bank had been good or very good. This was down from 64.9 per cent in May 2020. Like overall relationship satisfaction, quality of communication had steadily slipped over the past three years (in November 2017 it was 79.3 per cent).
• The average farm business mortgage interest rate was 3.9 per cent. This was down from 4.2 per cent in May 2020 (and down from 4.6 per cent a year ago). OCR cuts were flowing through to farmers, although it would seem not as quickly as they have for residential mortgages, where there was a lot more competition.
• The average farm business mortgage was $4.0 million. This was up from $3.8 million in May 2020. However, the median mortgage declined from $2.4 million to $2.1 million.
• 60.7 per cent of farmers had a detailed, up-to-date budget for the current 2020/21 season, while 23.0 per cent had a detailed, up-to-date budget for future seasons. Sharemilkers remained the most likely type of farming to have detailed, up-to-date budgets.