Feds survey: Interest pinch weighs heavily on farmer stress
Farmers are being squeezed by rising interest rates, with debt or other financial concerns eroding mental wellbeing, the latest Federated Farmers Banking Survey shows.
Nearly 1200 farming businesses answered questions in the November survey, reporting that their average mortgage interest rate had increased to 6.29 percent from 4.59 percent in May (and 3.95 percent in November 2021),
"It’s a reflection of the impact of official cash rate rises and while plenty of other Kiwi households and businesses are also feeling the pinch, many farms are carrying high debt," Feds President and economy spokesperson Andrew Hoggard said.
Since the May Federated Farmers survey the average farm mortgage value has increased from $4.07 million to $4.19 million while the median increased from $2.25 million to $2.50 million.
The average level of overdraft was up $46,000 to $328,800, with an average interest rate of 8.59%.
"It’s not a surprise given those big numbers that just over 40% of farmers said they felt their mental wellbeing had been affected by their debt levels, interest rates, changing condition, or other forms of financial pressure," Andrew said.
Also released recently was the government’s primary industries Situation Outlook Report. It highlighted the boost to the economy from an estimated record $55 billion in food and fibre export returns by June next year, but what didn’t make the headlines was that farm expenses jumped 15% in the September quarter compared to the September quarter 2021, with rises in fuel (53%), fertiliser (37%) and debt servicing (34%) leading the way.
Farmer satisfaction with their bank relationship continues to slip, the Feds survey showed. Although just on 60% of farmers said they were very satisfied or satisfied with their bank relationship, this was down 5 points from the survey six months earlier, and is the lowest since the biannual surveys began in 2015.
Some 17.4% of farmers perceived they had come under undue pressure over the past six months, up 3.5 points from May 2022, with sharemilkers leading the way (20.7%).
Overall, banks’ conditions for lending became tougher rather than easier for all farm types, with 3.3 percent reporting easier conditions and 26.8 percent reporting tougher conditions.
"Satisfaction with communication from banks slipped again," Andrew said. "That sector might reflect on comments from respondents that personal contact from bank staff has been declining over recent years and most farmers are unhappy about it.
"High staff turnover, rural bank branch closures with consolidation of staff into bigger branches and regional centres, and Covid work policies (e.g., working from home and less able to travel) have all been cited as reasons for reduced personal contact."
Note to journalists/editors: A copy of the survey report is available if you send an email to [email protected]
For more information contact:
Federated Farmers President and economy spokesperson Andrew Hoggard, 027 230 7363
Simon Edwards | Communications Advisor, Federated Farmers
Email: [email protected], Mobile: +64 (0)27 484 8892