Feds banking survey: More farmers feel under pressure and costs of finance on rise

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RNZ

More farmers are feeling under pressure and costs of finance are on the rise, a new Federated Farmers survey shows.

The bi-annual banking survey asked just over 1000 farmers about their relationship with their bank and about their financial situation.

Of those surveyed, 64 per cent said they were very satisfied or satisfied with their bank relationship - a three-point drop from the previous survey in November.

Fourteen per cent of farmers perceived they had come under undue pressure from banks over the past six months, up slightly from November.

Overall, banks' conditions for lending became tougher rather than easier for all farm types, the survey found.

The average mortgage interest rate increased to 4.58 per cent from 3.95 per cent in November, showing the impact of official cash rate (OCR) increases on lending rates.

Federated Farmers president Andrew Hoggard said inflation was putting many New Zealanders and businesses under pressure, and food producers were no different.

"For farmers, higher interest rates are coming on top of significant hikes in the cost of other farm inputs including freight, fertiliser, fuel and labour, ultimately, all of this will impact food prices," he said.

The average mortgage interest rate increased to 4.58 per cent from 3.95 per cent in November, showing the impact of OCR increases on lending rates, Hoggard said.

Beef and Lamb New Zealand's Economic Service Sheep and Beef On-Farm Inflation Report released this week shows that on-farm inflation is at its highest level in almost 40 years.

Consumer Price Index (CPI) data has the annual inflation rate at 6.9 per cent, the latest on-farm inflation rate has hit 10.2 per cent.

Beef and Lamb New Zealand chief economist Andrew Burtt said while on-farm inflation had been comparable with the CPI in recent years, the 2021-22 report showed farmers were now facing significant price increases in all but one of 16 input categories.

"Sheep and beef farm input prices increased by 10.2 per cent in the year to March 2022, and when interest rates are excluded, input prices were up by 10.7 per cent.

"With a tight labour market and increased import shipping costs, farmers have seen increased prices for contractors, tradespeople, machinery and parts for operating farm infrastructure and vehicles."

Increasing prices for fertiliser and fuel also contributed and were likely only going to get worse, he said.

- RNZ