Farmer debt - the reality behind the lioes and propaganda

Here it comes. The parasite banks are after their pound of flesh while the media spouts propaganda about farmers and banks "working together".

Banks go for broke while farms cope with debts

Some banks are pressuring Northland farmers struggling with the low milk payout to sell their farms with high debt levels, even though they have not missed a single repayment over the years.

The financial pinch is on farmers in Northland.

the Northern Advocate,

10 August, 2015

At least eight farms throughout the region, particularly in Kaipara, are in danger of being sold if their owners do not come up with a repayment plan that is acceptable to their lenders, farming leaders have told the Northern Advocate.

The financially-beleaguered farmers have enlisted the help of Farmers of New Zealand to try and thwart the foreclosure of their farms they had lived on for many decades. Foreclosure is the legal process that banks use to get back some of the money they loaned when a borrower cannot repay the loan.

A dairy farmer from Waiotira, 32km south west of Whangarei, received a letter from his bank two weeks ago asking that he submit a plan by the end of October on how he would meet his repayment.

"I had a feeling in late autumn when milk prices started falling in the dairy auctions that my bank may act but I hope I'll be able to salvage my farm, although it's going to be a challenge," said the farmer, who did not want to be named as he was still in talks with his bank.

He worked as a sharemilker for 11 years before buying the farm eight years ago. The dairy farmer, who has not missed any repayments, attributed his present financial situation to the low milk payout and having to buy shares in Fonterra.

"I initially bought about 53,000 shares and last February I had to buy another lot and I am buying another lot in December and being a co-op you have to buy these shares."

He said if the dairy prices improved before the year was out, they would not increase by much.

Farmers of NZ operations manager Bill Guest said the debt of those pressured to sell their farms ranged between $1.5 million and $5 million, with varying levels of stock.

"Banks can simply say they won't roll over the farmers' current mortgage terms because they perceive the long-term prognosis is no good and the debt is too high. What is happening is just the start," Mr Guest said.

He said Friday's announcement of a revised forecast milk payout of $3.85 per kg of milk solids would further worsen the situation for farmers.

Auckland lawyer John Waugh is acting for a number of farmers in Northland facing foreclosure - he said many farms were now simply financially unsustainable.

Banks only took action when they were contractually entitled to do so and they exercised their rights under the Property law Act.

"I have seen banks place maturing term debt facilities 'on demand' and then make demand for repayment even though the mortgagor has met all payment obligations. The bank is contractually entitled to do that but it appears to be harsh. 

Typically in these cases the bank has reached a view that the debt levels are too high - even though of course the same bank was the lender," he said.

ANZ said it was working with its dairy producer customers throughout the country to help them through this low price period and position their businesses for the future.

ASB is not currently progressing enforcement on any farms in Northland. BNZ was not prepared to discuss the specifics but said it worked with its customers by tailoring solutions to their needs on a case-by-case basis.

The other banks had not responded by edition time.

- Northern Advocate

Dairy farmers may soon "be forced to sell"

The Labour Party is warning that banks could soon be forcing dairy farmers to sell their land, and that overseas investors will buy it up.

Radio NZ,

10 August, 2015

Labour leader Andrew Little believes tracts of dairy farmland are likely to be sold off throughout 2016.   Photo: RNZ / Alexander Robertson

Fonterra has slashed its forecast payout for the season to $3.85 per kilo of milk solids - far below the break-even point for many farmers.

Labour leader Andrew Little said the plunge in Fonterra's predicted payout reflects global prices and comes as no surprise.

Mr Little was expecting prices to stay low for several seasons, and he said banks' patience with many indebted farmers will wear out before then.

"The banks have so far told me they'll see farmers through one difficult season, but they would struggle to see them through two difficult seasons.

Listen to more on Morning Report ( 3 min 37 sec )

"The question then, is what happens to both farmers who cannot meet their payment or the cost of production, and what happens to the land that they're farming?" Mr Little asked.

"The risk is of course that they then have to go on the market and the cash that's available to pick up land is offshore money and we then risk seeing a lot more productive land going into overseas hands."

Mr Little said it was likely tracts of dairy farmland would be sold off throughout 2016.

"At some point the banks will lose patience, that's the nature of them, I suspect that next year the crunch is going to start to happen, in terms of land ownership and land sales."

Primary Industries Minister Nathan Guy said global dairy prices were falling further and faster than anyone anticipated.

He said farmers would need to hunker down and ride out a tough 12 to 18 months - but he was confident the banks were prepared to ride it out with them.

"The indication that I'm getting from the bankers is that they will stand by farmers," Mr Guy said.

"It's also good to see that Fonterra have stepped up and they're offering 50 cents [per] kilogram of milk solids - basically an interest free loan."

New Zealand First leader Winston Peters said the dairy industry was in the middle of a crisis and that the minister's optimism was completely unfounded.

"The banks are moving on these farmers already - that's the point," Mr Peters said.

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"They are making very clear that people may as well exit, or if at best they'll be told to accept a certain price and paid a salary and stay on and keep the farm, as much as possible, viable.

But all their equity will be gone and they'll be no longer owners of the land..." Mr Peters said.

Mr Peters said this season's payout would head lower still, $3.50kg/ms, and he argued that Fonterra needed to suspend its trading on the Global Dairy Trade auction while prices were low.

Green Party primary industries spokesperson Eugenie Sage said the Government and Fonterra's strategy to produce ever more milk puts farmers and the economy at greater risk.

"You've got Fonterra still preoccupied with this growth strategy of 2 to 3 percent annually, of growing production to 30 billion litres by 2025.

"That makes us much more vulnerable to changes in commodity prices."

Ms Sage said the Government needed to be encouraging diversification and more investment in research and development.

This year, the Reserve Bank warned high levels of debt in the dairy sector were a threat to the economy - saying dairy debt had trebled to $34 billion since 2003.

It said a third of that debt was owed by 10 percent of dairy farmers.