Contractors seek loan finance

Press, Volume CXI, Issue 32774, 26 November 1971, Page 6

Contractors seek loan finance

A representative of the agricultural and chemical applicators’ section of the Contractors’ Federation yesterday asked the committee of inquiry into farm lending to have its members regarded as farmers for financing purposes.

In making this submission, Mr B. A. Murray (Harewood) expressed concern that farmers should obtain finance from the State Advances Corporation for buying equipment, and then go into competition with contractors who obtained their plant by hirepurchase. “Farmers cannot have agricultural services and then run the contractors out of business at the same time,” Mr Murray said. In his submissions, Mr Murray said that about 6 per cent of a sheep farmer’s expenditure was on contract work. North Island hill-coun-try sheep farms averaged $l4BO a year on contract work, while a dairy farmer spent about $175 on contract work. A conservative estimate in 1969 placed the value of contract work done for farmers at more than s2sm. If there was to be a growth in contracting services, bona fide agricultural and chemical applicators must have access to loan finance at low interest rates, and with reasonable terms of repayment for

the purchase of capital equipment.

His organisation suggested that low-mterest loan finance, required by farmers for farm development, be approved subject to the condition that the machinery purchased with this finance be used to develop the owner’s property only. “Who would you see qualifying?” asked the chairman (Mr D. C. Kirkpatrick) when Mr Murray confirmed that the basis of his submission was that agricultural contractors be regarded as farmers for financing purposes. Mr Murray suggested a heading contractor, in a district such as Rakaia, who faced a lot of competition from farmers who went out contracting when it suited them.

This type of contractor would have an outlay of about $16,000 on a header. “Where a man has to make this sort of outlay for agricultural purposes, we see a case for loan finance,” he said.

“How would you feel about the transport industry, which also services agriculture, also having access to

this sort of money?” asked Mr Kirkpatrick. “That is another point, too,” Mr Murray said.

Mr Murray submitted that a contractor’s plant should be viewed like a fanner’s livestock, but the chairman said stock were a permanent asset, and did not age like plant. Stock regenerated itself. The chairman noted that plant was subject to a heavy write-down in value the first year, and suggestd that it was at this point that a contractor should put something by for future replacement. Mr Murray’s submissions included a copy of a letter to the State Advances Corporation from the Contractor’s Federation expressing concern that farmers appeared to be able to- purchase agricultural machinery with money obtained at a low interest rate, and then undertake agricultural and earthmoving contracts in competition with bona fide contractors.

The letter detailed a case in the Christchurch district of a farmer obtaining a loan of more than $14,000 at 5J per cent for a tractor to devlop his farm.

The letter said that if reports were correct, this tractor was being used on agricultural and earth-moving contracts at uneconomic rates, and depriving bona fide contractors in the area of their means of livelihood. In addition, this farmer’s tractor was exempt for the usual registration and transport fees payable by contractors.

Mr Murray said the State Advances Corporation had not replied.