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Confidence in banks firm but challenges remain

Farmers confidence in banks firm but challenges remain for sharemilkers

While the dairy industry continues to recover after a tumultuous two-year downturn some sharemilkers will be feeling the heat this summer according to the latest Federated Farmers’ Banking Survey.

Of all sharemilkers who responded to the Survey, 19 percent felt they were coming under undue pressure from their bank on their mortgage, 13 percent expressed dissatisfaction with their banks and 11 percent reported poor communication

These percentages were all significantly higher than those for farmers generally.

Still, bank satisfaction overall remains strong with 81 percent revealing they were very satisfied or satisfied with their bank, up one percent from the previous survey in August. Seven percent were feeling dissatisfied or very dissatisfied, also up one point.

Similarly, 77 percent of farmers rated their bank’s communication excellent or good. This is down a little from August but still strong overall. Seven percent believed it had been poor, up one point.

"These trends are underpinned by a decrease in farmers feeling ‘undue pressure’ around mortgages, down from 12.1 per cent to 10.7 percent, with overdrafts following suit, from 9.2 per cent to 8.5 per cent," says Federated Farmers President Dr William Rolleston.

Generally speaking, those in the dairy sector were perhaps feeling less pressure than in August, but their industry counterparts in the sheep and beef and arable industries experienced a pick-up in pressure, although still below dairy.

"Drought, tough market conditions, and Brexit have added more uncertainty to the sheep industry and farmgate lamb prices have been affected by a persistent strong NZ Dollar, especially against the Pound and Euro," says Dr Rolleston.

Sheep and beef farmers tended to be less indebted than dairy farmers and until now at least have mostly escaped the attention applied to dairy farmers.

"As with previous surveys, dairy farmers, including sharemilkers, are more likely to have detailed up-to-date budget plans in comparison to sheep and beef and arable farmers.

"Make no mistake, the dairy industry is still going through an adjustment of sorts and it remains the most vulnerable of all farming sectors. It’s no surprise the Reserve Bank continues to highlight dairy as one of the main risks for financial stability," Dr Rolleston says.

The Survey also shows the average mortgage interest rates continue to edge down. This may be due to farmers renewing their loans at lower fixed rates. Average overdraft rates edged up slightly though.

Karen Scott-Howman, Chief Executive of the NZ Bankers Association, welcomed the Survey results.

"We’re pleased to see consistently strong overall bank satisfaction among farmers. That reflects the fact that banks are working hard with their agri clients to see them through each sector’s cycle. Good two-way communication, controlling costs and having a budget in place are all important factors in getting through."


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