The downturn in the dairy sector has been widely reported. There has also been a lot of speculation about the gravity of the situation and how bad it will get. Let’s not get ahead of ourselves.
As is the case with a lot of other industries, the dairy sector can be volatile and complex, and this is reflected in the recent significant drop in dairy prices from historic highs over a relatively short time. That’s all down to a variety of reasons mainly driven outside New Zealand. None of this is new for farmers. They’re used to dealing with a range of challenges from weather extremes, to disease and global price swings. It’s all part of the business.
Farmers are resilient and they’ve seen most of this before. They are used to the ups and downs of the farming business and buckling down and reducing costs in order to get through a tough season or two.
Importantly, farmers are not alone in facing these challenges. Banks have skin in the game and work hard with farmers facing financial challenges. It’s very much in their interests to support farmers through both the tough times and the good.
Banks always seek to work closely with their customers. The current downturn is no exception with banks continuing those close working relationships with farming customers.
There is a wide range of potential measures available across the banking sector that will vary from case to case for farmers who may face difficulties. These can include options to help fund working capital shortfalls in times of financial stress.
Depending on individual circumstances, banks might be able to look at reducing or suspending principal payments on loans and temporarily moving to interest-only payments.
Banks might also consider allowing term deposits to be broken without associated costs. They can also help by providing affected farmers financial management and budgeting assistance, and access to workshops on enhancing farm productivity and performance.
All of this depends on the particular circumstances involved. The most important thing, as with anyone facing financial challenges, is to talk to your bank early. The sooner you talk to your bank about options for getting through, the more likely they’ll be able to help.
Assistance for farmers is also available from a range of other organisations including Rural Support Trusts, Federated Farmers, Farmstrong, and the Ministry for Primary Industries.
Banks and farmers have a lot in common. The banking sector understands and proudly supports the huge contribution that the farming sector makes to the national economy. We all know that farming is hugely important to our economic fortunes as New Zealanders.
Banks have a long history of involvement and investment in this sector and are keen to continue playing a key role in helping facilitate business growth for farmers and New Zealand. Because of this, banks stand alongside farmers to help them work through volatility in commodity prices, climatic issues, and biosecurity challenges in order to get the business to a viable position.
Despite the current lows in the dairy cycle, the long-term outlook for dairy and protein production remains positive. It’s important to keep the bigger picture in mind as we navigate some bumps in the road ahead.