Let us hope the Government keeps a steady hand in the wash up from the South Canterbury debacle. Wholesale disposal of the many farm assets in a fire sale approach would severely damage agriculture and the economy.
The public must remember that it has been agriculture, or more importantly dairying that has allowed NZ to weather the worlds economic storm as well as it has.
What are the lessons that could be learnt from this situation? The main one is indebtedness, with a small % of agriculture carrying a big % of the debt, some farms were always going to be at risk in these times.
The future goals have to be profit driven, as managers can no longer put up with a low profit and boost it with capital growth. It will be interesting to see how many dairy conversions are now being contemplated, as financial meltdowns like this, focus the risk taking decisions more keenly.
Other alternative land uses could again be more competitive, if the risks of increased debt are to be valued properly.
Seasonal finance is the biggest issue for farmers following the announcement that a significant rural lender South Canterbury Finance has gone into receivership, Fed Farmers says.
Farmers should seek trusted and credible advice to ensure seasonal finance continued, President Don Nicolson said.
Land was the genesis of the economy and if farmers did not secure seasonal finance there would be a "significant" impact, he said.
Nicolson said that while receivership was tough for all involved, receivers could find "a lot of salvageable parts".
"I'm still calling for calm and patience today because you actually need to get a better understanding of the ramifications of what receivership means."
Nicolson this morning wrote to Finance Minister Bill English and Agricultural Minister David Carter, suggesting some farmer support systems be put in place.
He also suggested rural debt mediation guidelines, such as those used in Canada and Australia.
"(Because) when you (the farmer) are faced with going to the wire or the wall, you'll have a proper process being embarked upon by your lenders and you as a borrower have some way of ... exiting with dignity."
6 Comments
While you are at it Don, please advise your members, that in the future that borrowing too much money for capital gains/ land grabbing farming is now over and land prices must come down to reflect that. Also let them know that other taxpayers are sick of farmers wanting handouts every time there is a drought or flood etc or when they get themselves in a financial mess. Enough is enough!
Lets look past all the alarmist hyperbole here re farm prices. The facts are farm prices have already softened significantly on very low volumes and it may be that they come off some more. However for the vast majority of us that are neither buying or selling this is essentially irrelavant in the interim. What is important is our income verses our cost of production which for the most part looks to be quite favourable for the coming season. Whilst our cashflows are sound, land price meltdown remains the stuff of blogger hysteria only.
I dont think returns on land will ever equal other investments but a little closer would be nice. The problem in farming is the non-discretionary costs are getting out of hand.
Im living in the States and its nice to get a good 96 shiraz for $4 a bottle and good drinkable plonk at $2,long live the wine glut. Unless NZ costs fall dramaticly then the future for our wine industry is pretty grim. However with huge surpluses in Aussie we should be able to get hold of good wine at below cost for a few years yet. The chances of our costs falling are pretty close to nil in the short term, in fact Id bet on them increasing.
The risk of a meltdown in NZ farm values is probably higher than most NZ farmers realise. I suspect that we will get a reset but it going to take a while as the Govt pulls all the levers to try and maintain the status quo. Im happy to keep out of the market, I may get a bit of land offshore and play around for a bit, its nice not having to go to the bank cap in hand every year. I think that if land values fall off shore then a lot of Kiwis will learn to fly pretty quick, Im looking at US milk production figures and if the increase in production this year is exported then we have a problem, NZ will need to send even more troops to foreign lands.
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