Arable farmers have appealed to their dairy farmer colleagues to buy their grain rather than importing it from overseas.
Federated Farmers arable spokeswoman Karen Williams complained about the lack of a level playing field over grain sales.
She was commenting on the Feds’ latest banking survey showing 30 per cent of the arable farmers surveyed felt under pressure and they also had the lowest percentage feeling very satisfied or satisfied (60 per cent).
“We need the dairy industry to take note of this. Arable farmers have stocks of grain but they don’t know how much they are going to get paid – it’s not a good business model.”
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Williams said there was not a level playing field because United States farmers had government-backed insurance in case of a crop disaster, while the impact of greenhouse gas emissions was not taken into account for imported grain.
New Zealand arable farmers on the other hand were facing increased costs for a number of environmental issues.
TONY BENNY/STUFF
Grain harvesting on the Canterbury Plains. Arable farming contributes $1 billion a year to the economy.
Typically farmers can buy imported grain for about $40 a tonne less than the New Zealand equivalent, although costs to get it on farm can make the figure balloon out to $80 a tonne less.
Feds economics and commerce spokesman Andrew Hoggard said arable farmers’ gloomy outlook was for a number of reasons.
“This might reflect a combination of some poor to average recent harvests, competition from cheap imported grain reducing demand and prices, and the fact arable farmers, because of the very nature of their businesses, have very lumpy farm incomes and thus need bigger overdraft facilities compared to other farm types. Banks generally want to see overdrafts reduced.”
The banking survey shows the total number of farmers across all sectors feeling the squeeze has risen from 16 to 23 per cent.
It follows the latest Reserve Bank financial stability report this week which highlights continuing concerns with dairy debt, and warns about concentrated debt within the sector.
The Reserve Bank report shows arable debt is a minor proportion of overall farm debt, at 3.1 per cent, compared to dairy debt which accounts for two-thirds.
“The sector has a high debt-to-income ratio at 350 per cent, with 30 per cent of debt held by highly indebted farms,” the bank said.
Sharemilkers, who have historically reported feeling under the pump from banks, have in latest survey expressed higher than average satisfaction rates.
SUPPLIED
Federated Farmers arable spokeswoman Karen Williams says Kiwi arable farmers are up against an unfair playing field when it comes to competition.
Hoggard said one factor was that the average sharemilkers’ interest rates were now only marginally higher compared to other farming groups. The current average mortgage rates across the more than 1300 survey respondents and all farming types decreased 0.4 percentage points to 4.6 per cent between May and November. Sharemilkers’ rates decreased from 5.3 to 4.8 per cent.
Farmers were looking forward to the Reserve Bank’s December 5 announcement on its bank capital proposals because it would provide some certainty, and possibly extend the transition period from the proposed five years to 10 years.
The Bank said the most financially vulnerable farms were unlikely to see significant relief in their financing costs because, despite low interest rates, a number of banks wanted to lift their margins by imposing fees for various facilities and through repricing higher-risk borrowers.
While farmers could sell to get out of debt, farm sales were at historically low levels. In the 2018-19 dairy season, 148 farms changed hands, compared to an all-time high in 2013-14 of 312.
