Fewer farmers are feeling undue pressure from their bank but satisfaction rates continue to slide, according to the Federated Farmers November Banking Survey.

Of the 1,341 farmers who responded to the survey independently run by ResearchFirst, 65.4% said they were satisfied or very satisfied with their bank relationship. That’s down from 68.5% from the Feds’ survey in May.

"Satisfaction has steadily slipped over the past three years - in our November 2017 survey it was 80.8%," Federated Farmers President and commerce spokesperson 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. Banks put the pressure on farmers to reduce their debt when commodity prices are good to put them into a better position to weather the next downturn, and there is 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," Andrew said.

One bright spot from the November survey is a slight drop in the number of farmers feeling under pressure from banks, from 19.3% in May to 18.4% last month. A possible explanation is that the further postponement of the Reserve Bank’s stiffer bank capital requirements for higher risk margins is trickling down to the trading banks’ stance, Andrew said.

Farmers’ bank pressure sentiment peaked at 23.2% in November last year but despite the recent easing in pressure it remains a lot higher than earlier years of the Feds survey, when it ranged from 5% to 10%.

Pressure is highest for dairy farmers (24.9%) and arable farmers (23.3%). Meat & wool farmers are feeling the least pressure (10.3%).

Despite being less satisfied with bank relationships and bank communication, sharemilkers’ perceived pressure is much lower than that for dairy farmers as a whole (12.8% vs 24.9%) and is 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," Andrew said.

Other key findings from the November survey:

• 61.8% of farmers feel communication with their bank has been good or very good. This is down from 64.9% in May 2020. Like overall relationship satisfaction, quality of communication has steadily slipped over the past three years (in November 2017 it was 79.3%).
• The average farm business mortgage interest rate is 3.9%. This is down from 4.2% in May 2020 (and down from 4.6% a year ago). OCR cuts are flowing through to farmers, although it would seem not as quickly as they have for residential mortgages, where there is lots more competition.
• The average farm business mortgage was $4.0 million. This is up from $3.8 million in May 2020. However, the median mortgage declined from $2.4 million to $2.1 million.
• 60.7% of farmers have a detailed, up-to-date budget for the current 2020/21 season, while 23.0% have a detailed, up-to-date budget for future seasons. Sharemilkers remain the most likely type of farming to have detailed, up-to-date budgets.

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