Farmers urged to talk to banks

The Country Friday, 05 August 2016 

Dairy farmers are being urged to keep up relationships with the bank and be proactive to get through the tough times.

Crowe Horwath’s head of corporate agribusiness, Hayden Dillon, said discussions were an “important step to take in dealing with the financial pressures both parties are facing”.

A Federated Farmers’ survey has found one in 10 farmers are feeling an ‘undue’ level of pressure from their bank but he encouraged farmers to take ownership of the relationship.

“We know banks are being asked to fund another year of losses in many cases. They determine funding by assessing the risk profile of the individuals or business they are lending to.

“Farmers need to provide them with accurate information to form a clear picture of the farm’s position and the confidence they have a plan to get through this.”

Real-time cashflow analysis, forecasting and budgeting were vital in modern farming business, Mr Dillon said.

“Farmers should challenge their advisers for help with budgets and forecasting and if they need to they should bring them to their bank meetings for support.”

Banks did not want to see farmers out of business, but they do require them to work closely with their bank manager and keep them updated, he said.

Rabobank Northern North Island regional manager Bruce Weir said a problem shared was a problem halved and farmers needed to understand their numbers.

“Really own those numbers and understand what levers to pull … and where to pull levers that will enable their business to be sustainable.

“If you have a business strategy that is half the pressure disappearing really.”

Rabobank was comfortable with most debt levels of its customers as it had a long term view, he said.

BNZ head of agribusiness John Janssen said it was still tough for dairy farmers.

“This past season was really a defining one for many of our clients, with the majority surprised by the cost reductions and efficiencies they have been able to achieve. In general farmers understand their position much better now than at the same time last year, this makes it easier to get appropriate facilities and structures in place ahead of time and as a result, most of our farmers have funding lines in place for the season.”

ANZ external communications senior manager Stefan Herrick said in the short term, many farmers would be configuring their businesses to ride out the low prices.

“But as always will need to look at ways to invest in the efficiency and productivity of their operations. Farmers also need to look after themselves emotionally as well as financially.

Communication is key – they shouldn’t feel alone in this situation, and should ask for help and support from everyone involved – family, advisers, fellow farmers and professional advisers as well as their bank.”

Federated Farmers Rotorua/Taupo provincial president Alan Wills said farmers were in the third year of a low payout and “I am encouraging banks and farmers to say look we have managed this far let’s just hang in there and make sure we get out of this”.

Mr Wills said he was confident the industry would see a recovery.

Rural Support Trust Bay of Plenty chairwoman Sandy Scarrow said farmers should keep in contact with their bank and the trust had three former bankers who “can help steer the way through some difficult conversations with the bank”.

Dairy NZ data shows about 10 per cent of the most indebted dairy properties owe a combined $11billion to $12b.

How to cope:

• To reduce stress, work on communication in the family and with advisers.
• Be proactive and create solutions or plans that suit your individual situation.
• Forecast cashflow for the next two seasons. Consult your bank on funding needs early and as needs change.
• Budgeting provides agility and allows informed decisions to be made when something changes.
• Decisions are complex. Ensure advice is high quality.
• Avoid short-term thinking. Understand your cost structures and the levers you can pull to get the best long-term outcome.
• Work with your accountants on tax and planning.