The latest fall in dairy prices raises many questions for everyone involved in the dairy industry.
Fonterra is cutting more than 500 jobs.
Farmers are rethinking everything.
But how will the bankers respond?
We asked Graham Turley, the managing director of commercial & agri banking at ANZ New Zealand some questions. ANZ is New Zealand’s biggest rural lender with about $11.3 billion of dairy lending. Here are Turley’s responses.
interest.co.nz: How will ANZ respond?
Turley: These periods of low commodity price come round regularly and a positive attitude and willingness to ask for help and plan are the keys to getting through.
We’ll be keeping in close contact with our customers to provide whatever support and advice we can, and would encourage farmers to not hesitate to get in touch with us.
At times like this, it’s very important for farmers to have a clear picture of their situation, to understand their options, get advice and plan ahead.
They 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.
interest.co.nz: Will more or less credit be available to farmers?
Turley: Farmers need money to operate their business and ANZ is supporting its customers. Further than that, we know that farmers need to make their business as efficient as possible and that requires investment.
In the short term, many farmers will be configuring their businesses to ride out the low prices, but as always will need to innovate to meet the challenges ahead.
Growing global demand, intensified competition, tighter environmental regulations and easier access to markets will combine to make the industry of tomorrow much tougher than it is today.
It will be vital for farmers to increase the productivity and efficiency of their operations. We have recently extended a low interest loan package, that we have used to help red meat farmers improve pasture and forage, to dairy farmers.
In terms of business governance, efficiency gains can be made by a disciplined investment and management regime, assisted by sophisticated farm system modelling, financial modelling and environmental outcome modelling tools.
interest.co.nz: Will there be a pullback in lending to the dairy sector?
Turley: We’re confident in the future of the dairy industry and will support our customers in this low commodity price period.
interest.co.nz: For farmers with high debt – especially dairy farmers – will the bank be amenable to extending terms? Will you permit increased borrowing despite a poor short-term outlook?
Turley: Every farm has a different cost structure, and we’ll be working with farmers to work out the best way we can help them respond to current challenges.