Food producers have been under pressure as on-farm inflation hit a record high
The bi-annual Federated Farmers banking survey has revealed more farmers feeling under pressure as costs of finance climb.
Out of more than 1,000 surveyed farmers, the percentage of respondents who were very satisfied or satisfied with their relationship with their banks has dropped by three percentage points to 64% since the last survey conducted in November.
Fourteen per cent of farmers believed they had come under undue pressure from banks over the last six months, a slight increase from November’s numbers. Sharemilkers felt the most under pressure at 21%.
Twenty-one per cent reported tougher conditions for lending versus the 4% that reported easier conditions. Over the past six months, the average farm mortgage value increased from $3.6m to $4.1m, while the average mortgage interest rate increased from 3.95% to 4.58% – an effect of the OCR increases on lending rates.
Despite these figures, satisfaction with bank communication remained stable, albeit slowly declining over the past five years. More than half said their bank communications had been very good or good, with arable farmers rating their quality of communication the highest. Sharemilkers were the least satisfied, as fewer than half said they were very satisfied or satisfied. Those without bank loans were particularly unsatisfied with communication, which Federated Farmers president Andrew Hoggard pointed out was due to reduced personal contact from bank staff following rural bank branch closures and COVID work policies.
Read more: What’s causing farmer satisfaction with banks to slide?
Hoggard said inflation was putting many Kiwis under pressure, including food producers.
"For farmers, higher interest rates are coming on top of significant hikes in the cost of other farm inputs including freight, fertiliser, fuel, and labour. Ultimately, all of this will impact food prices," he said.
A recently released report from Beef + Lamb New Zealand showed that on-farm inflation was at its highest in almost forty years – or since 1985-86 – at 10.2%, while CPI data has the annual inflation rate at 6.9%.
Beef + Lamb New Zealand chief economist Andrew Burtt said while on-farm inflation had been comparable with the CPI in recent years, the latest numbers showed farmers facing significant price increases in all but one of 16 input categories, a trend he expected would only get worse.
Read next: BNZ launches NZ's first agribusiness sustainability-linked loan product