Farmers’ losses quantified

Press, 20 February 1986, Page 18

Farmers’ losses quantified

PA Wellington A national study has quantified the expected deficits of 20 per cent of sheep and beef farmers this year. Conducted by the Stock and Station Agents’ Association and covering 2103 clients of member companies who were expecting losses, it showed that 40 per cent of them will lose $lO,OOO or more. The study, the second in a series by the association, showed that 60.7 per cent of the “marginal” group of farmers would lose up to $lO,OOO. The figures are the result of a national survey of client accounts, which in September showed that 2119 (20 per cent) of 10,640 farmers surveyed would make a loss this year, and that their activities could be described as marginal in spite of the assessment of them as “capable” farmers. The latest study shows that of the 2103 clients surveyed, 12.2 per cent or 257 now expected to break even. The bulk of farmers in the “marginal” group, 1021 or 48.5 per cent, expected to lose up to $lO,OOO and 507 (24.1 per cent) expected to lose between $lO,OOO and $20,000. A further 318 (15.2 per cent) would lose more than $20,000. The association said the latest figures were based on information collected in December. Its accuracy reflected the close relationship between stock and station companies and their clients, who together developed budgets and monitored performance against them. The study also looked at the equity levels of 2336 farmers, based upon a realistic assessment of today’s market value of their farms, and concluded that a third of surveyed farmers had less than 20 per cent equity in their properties. A total of 205 had no equity left, and a further 210 had less than 10 per cent, with 360 (15.4 per cent) estimated to have between 10 and 20 per cent. The president of the association, Mr Tony Harper, said yesterday that the survey

highlighted the plight many farmers found themselves in as a result of high debt servicing after recent development or land purchase at inflated prices. The low market returns for farm produce had created serious liquidity problems and depressed land values. Mr Harper warned that the figures, being Decem-ber-based, were more optimistic than they would be if the survey were made today. “Farmers’ positions are deteriorating day by day in the present economic climate,’ he said. “An easing in the value of our dollar or a downward trend in interest rates, both of which have been forecast by the Government, could solve some of the problems, but neither appears imminent. “For a number of farmers the situation is clearly hopeless and they will have to sell,” he said. “It has already become clear that some farmers are not able to pay interest or principal and the issue must be quickly addressed in a manner that is fair and equitable to all parties, farmers, lenders and the Government,” Mr Harper said. “It must always be remembered that it is the Government’s policies, which encouraged development through support schemes and lowinterest loans, that created the high land values. The present Government’s change in policy has left farmers and lenders at considerable risk. “The stock and station industry is a seasonal funding source to farmers and is supporting many competent farmers through short-term finance. In some instances the industry will have to continue accommodation to a number of deficit accounts. “However, we cannot be expected to continue financing farmers who are in chronic positions, particularly when the Rural Bank, which is involved in 80 per cent of marginal operations, is beginning on the instructions of the Government to take a hard line. “The Rural Bank is prepared to restructure some hard-core and term debts

and having done so using all the farmer’s equity including livestock is expecting our companies to continue their traditional role without adequate security,” Mr Harper said. "We have as great a responsibility towards our shareholders’ funds as the bank has, and it is wrong for the bank to use its position to disadvantage other lenders. ‘‘The position has recently been tempered by the Minister of Agriculture, Mr Moyle, when he says that the Government has to strike the balance between forcing farmers to change direction and forcing them to go under.” He said Mr Moyle was reported to have told a recent seminar on farm survival strategies that he guessed there was a fine balance between making people react, getting them to make decisions in the right direction, and forcing them to go under. “That is the balance that we have to strike to make sure that people do survive and make those changes,” Mr Harper said?