Farmers’ loans surprise

Press, 19 December 1986, Page 24

Farmers’ loans surprise

The number of sources of loans to farmers have amazed some creditors involved in Rural Bank debt restructuring meetings, said the former Lincoln College principal, Sir James Stewart

While chairing Canterbury debt discounting meetings, Sir James has been disturbed by creditors who could not hide their incredulity when they first saw the full and accurate details of liabilities.

He told the second annual Agribusiness Workshop in Wellington it is not uncommon for the liabilities side of a farmer’s balance sheet in mixed farming areas to contain seven or eight large items. “What can really cap it off is a list of unsecured creditors,” he said. “If you are not a cynic, you would say that it reflects the willingness of financing organisations to support the farming industry.” Alternatively, he suggested, the ease farmers have had in securing credit could indicate the

lender’s desire for business rather than the farmer’s ability to service the loan, provided the lenders thought there was security. In some cases heavy and costly borrowing was secured on plant that is now “virtually unsalable.” Sir James said a prominent stock and station industry spokesman admitted recently that companies had been as guilty in lending as many farmers have been in borrowing against increasing equity to maintain farming practices and lifestyles.

The “remarkable control” of advances this year shows that more responsible and tighter budgetary management by financiers could have curbed the evolution of hard core debt. “If we had not been cocooned by policy we might have acted earlier — after all it was happening in other countries,” he said. But many did not accept the difficulties looming, even in 1985,

when the general manager of the Rural Bank tried to convince people “who needed convincing.” Sir James said the warning was delivered when it became clear from analysis of 17,000 farm files that the industry was heading “for real trouble.”