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Rabobank reinforces commitment to agriculture

Media Release October 9, 2008 1

Rabobank reinforces commitment to New Zealand agriculture


Leading rural lender Rabobank says farmers and agribusinesses in New Zealand can be assured that it is business as usual from the bank’s perspective in the farm finance market, despite current global volatility in both financial and commodity markets. Speaking today, Rabobank general manager Rural New Zealand Ben Russell reaffirmed the bank’s commitment to New Zealand agriculture and its desire to steadily build its share of the rural lending market.

Mr Russell said the bank retained confidence in the medium to long-term outlook for New Zealand agriculture and, despite current difficulties in financial markets and a slowing local economy, was adopting a "business as usual" approach to its rural lending business.

"Rabobank always maintains a prudent approach to rural lending, assessing loans on the basis of debt serviceability (using long-term price and cost assumptions), collateral and management ability. The bank will continue to use this approach in the future, welcoming opportunities to assist existing and new clients with their legitimate business development and growth plans,” he said.

"We have experienced strong business growth over the past year, and retain an ambition to build our lending to quality New Zealand farming businesses.”

Mr Russell said that Rabobank's co-operative ownership and structure also added to the bank's solid position. Rabobank was founded as a farmers’ co-operative in the Netherlands more than 110 years ago and is still structured and run as a co-operative. "We recognise that farming, as with financial markets, can be volatile. Rabobank's international banking activities, including our New Zealand business, have food and agribusiness at their core, and we aim to support our clients through the ups and downs of the economic cycles that affect agriculture," he said.

Mr Russell said, despite a number of challenges facing the sector, Rabobank's view was that New Zealand agriculture is well positioned to grow and prosper through a focus on sustainable production growth and maintaining the highest standards of food quality and safety for discerning international markets.

“Recent falls in the New Zealand dollar against most major currencies and the potential for further cuts to official interest rates will provide some buffer for local farm businesses against an unstable international environment,” he said.

Mr Russell said that while the dairy industry had undoubtedly taken some hits in recent weeks – with lower commodity prices, a major food safety problem in China and a Media Release October 9, 2008 2 lowering of the forecast payout to dairy farmers by Fonterra for 2008/09 – it was the bank’s view that the medium to longer-term outlook for supply, demand and prices was better than the historic average. However, volatility will continue to be a factor for the industry, he said.

The sheep and beef sector is experiencing a better outlook for prices in 2008, Mr Russell said, on the back of sharply lower supply and continued good demand prospects. “The major challenge for the meat industry continues to be the longer-term challenge of rebuilding supply after a number of difficult years for sheep and beef producers,” he said. The New Zealand wine industry is looking at some significant challenges in 2009 as it adjusts to a record vintage in 2008 and continued growth in supply, however longer-term projections for demand remain positive, Mr Russell said.

“Many horticulture sectors have also found recent years challenging, in the face of a strong currency and very tough international competition and market barriers.” Mr Russell said as the world’s leading food and agribusiness bank, Rabobank was in a strong position to assist those in the rural sector with their financing requirements in the current market environment.

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