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High Dollar Brings Reality Check for Farmers

For immediate release

High Dollar Brings Reality Check for Farmers

The high Kiwi dollar means it’s reality check time for farmers who have borrowed heavily and are using high-cost management systems, according to Waikato rural economist Don Fraser.

“The dollar looks as though it will stay well up against the US currency for most of the dairy season, and some banks are now budgeting on a $3.80 payout. There wont be much spare cash next year on moderate sized dairy farms producing 60 – 80,000 kilos of milk solids,” says Fraser.

“Farmers with high principal repayments should be cutting costs and talking to their bankers about changing to interest-only loans. Some banks will refuse, and so those farmers will need to find other options.”

Fraser says that all farmers should reassess their personal spending and farm cost structure. For those with problems, possible solutions include returning to all-grass farming, refinancing, reducing debt by cutting house blocks off the property, or negotiating a more favourable selling price.

“Anyone in financial trouble needs to resist being hassled into a hasty sale. I have seen one client get substantially more for his property just by buying a bit more time and getting into a better bargaining position,” he says.

“Confidence in farming is still moderately high, but it is slipping. The time to act is now because in six months lenders will be more cautious and favourable options could be harder to find.”

Don Fraser is the Principal of Fraser Farm Finance and a consultant to the farming industry. For further comment contact him on 07-863-4885 or 021-951-170.

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