Sharemilkers, pressured by low prices, are least happy with their bank, survey shows

New Zealand's sharemilking farmers, feeling the pain from low milk prices, are the least happy with their banking relationships at the moment, according to the latest quarterly Federated Farmers Banking Survey.

The survey shows that while 81% of all farmers said they were either "very satisfied" or "satisfied" with their bank, sharemilking farmers lagged behind with a 70% satisfaction rating.

Sharemilkers are the most likely to feel they are coming under "undue pressure" from their bank regarding their mortgage, with 22% saying they were feeling the pressure, compared with 13% of dairy farmers and 9.7% of all farms. While farmers overall were positive about the quality of bank communication regarding their mortgage, with 78% rating it "excellent" or "good," sharemilkers' satisfaction rating lagged behind the average at 73%.

The country's dairy industry is under pressure as farmers head into the third season of low milk prices, below the level needed by most farmers to break even. Sharemilkers, who generally work on someone else's farm for a share of the profits, and own cows rather than land, are more exposed to volatile prices and likely to lean on their bank overdraft.

Sharemilkers were the most likely to have an overdraft, with a reading of 93% compared with 88% for all farms and 91% of dairy farms, and the average overdraft interest rate was the highest at 8.09%, compared with 7.59% for all farms and 7.63% for dairy farms. However, their average overdraft limit was lower at $156,300, compared with $240,700 for all farms and $251,900 for dairy farms.

Similar to the sentiment for mortgages, sharemilkers were also the most likely to feel they are coming under "undue pressure" from their banks over their overdrafts, with 20% saying they were feeling the pressure, compared with 10% of dairy farmers and 7.3% of all farms. They were also less happy with the quality of bank communication about their overdraft, with 62% rating it "excellent" or "good", lagging behind the average 74% for all farms.

Federated Farmers dairy chairman Andrew Hoggard said that while farmers overall remain satisfied with their banks, pressure is building and sharemilkers are feeling it the most, which was no surprise given the current environment. He noted that sheep, beef and arable farmers weren't reporting nearly the extent of bank pressure and experienced little change in quarterly movement.

New Zealand Bankers' Association chief executive Karen Scott-Howman said banks remain committed to supporting their farming customers, and encouraged farmers to talk with their banks early and often about budget planning, managing cashflow and any assistance that may be available.

The survey of 910 farmers across dairy, sheep, beef, lamb, and other sectors was taken between May 6-16.

(BusinessDesk)