The Federated Farmers farm banking satisfaction survey reveals on average 69% of farmers are satisfied to very satisfied with their banks, the first uptick in satisfaction for almost five years.
That is slightly up on the November survey report of 68% but still lagging significantly behind the rosier 80-plus percent enjoyed in the mid-2015 survey. Since then the level of satisfaction has eroded.
The results come out alongside the Reserve Bank’s Financial Stability report that highlighted the primary sector’s strength in the covid-19 crisis, albeit with pockets of debt vulnerability in dairying and forestry.
Federated Farmers vice-president and commerce spokesman Andrew Hoggard said the small upward trend is encouraging.
“It is only one survey but I think it is a good sign.”
It might also reflect a bit about how the covid crisis has highlighted to banks that issues around highly indebted dairy farmers are the least of their worries.
“Dairy farms still have the milk being sent away and the money is at least still coming in.”
The twice-yearly survey was based on responses from 1400 farmers and provides some insights to what farmer types are most and least grumpy about their bank’s performance.
Almost 67% of dairy farmers, who account for the lion’s share of farm debt, are satisfied but the group happiest with their bankers is the 72% of dry-stock farmers.
After several surveys where dairy farmers have felt under the pump to get principal repaid the sector appears to have made some peace with its bankers.
It has 24% saying they feel under pressure from their banks compared to 29% in November.
However, arable operators are significantly less impressed with only 58% very satisfied or satisfied and 28% feeling under pressure, down from 30% in November.
As an entire group however farmers in general feel they are under less pressure than six months ago with 23% reporting pressure then compared to 19% today.
Hoggard said the results come after a particularly challenging six months for most farmers with widespread drought in large parts of the North Island and the pandemic.
While less badly affected than some sectors by covid-19 farming has possibly also benefitted from the business finance guarantee scheme and the Reserve Bank’s decision to delay rolling out the tougher bank capital reserve demands to encourage lending.
“I think for some banks, though, that was never going to be an issue but others it was an excuse.”
He also said there has been a shift in how banks have been assessing farm lending compared to the heady days of easy credit.
“It used to be they would simply want to know how many kilos of milksolids you would do on the farm you were looking at and lend right up to a number based on that.
“Now the conversations are more detailed, around what your effluent system is like, how highly stocked you are and just how sustainable the entire business is.
“I think this is a good thing. Some of the rabbit holes lending has gone down in the past have done us no good.”
He believes the slide in interest rates might have also helped some farmers. But he is also cautious about how long those rates will last and how much faith can be put in them over the life of a long farm mortgage.
The average mortgage rate is now 4.2% and overdraft average is 6.6%.
“There are significant challenges ahead with the drought persisting, winter feed stores under significant pressure and uncertain global trading conditions to name a few.”
