News
16 FARMERS WEEKLY – farmersweekly.co.nz – September 20, 2021
Hort bank lending on the rise Hugh Stringleman hugh.stringleman@globalhq.co.nz BANK lending to the agricultural and horticultural sectors grew in the June quarter, led by Rabobank and ASB, while ANZ decreased its still market-leading position. Total lending at June 30 was $60.82 billion, up by $64 million compared with March 31. ANZ went down by $292m,
CHANGE: Rabobank senior analyst Emma Higgins says GDT prices had moved sideways or lower for the past six months, until the latest lift.
In the latest quarter of Reserve Bank of New Zealand reporting on agri-loans, dairy’s share fell by $199m to $38.18b, whereas horticultural borrowing increased by $218m to $5.95b. Lending to sheep, beef, cropping and other agricultural businesses was steady at $17.5b. Dairy loans have fallen by $1.63b over 12 months, a 4% rate of decrease. NZAB, the NZ-wide agricultural loan broker, which analysed the Reserve Bank figures, pointed out that lending to agricultural and horticultural sectors is less than 13% of total bank lending. That indebtedness total is now $478b, up $10b or 2.1% over the quarter, and up 6% in the past 12 months. Some 80% of that growth was in home loan debt. ANZ is the biggest loan bank, at $140b, followed by ASB, BNZ and Westpac all with $90-$100b each. Banks reported that 1.48% of their agri-loans were classed as non-performing and the range across all banks varied from 0.5% for ANZ to 2.9% for Rabobank.
Rabobank up by $220m and ASB up by $124m. ANZ remains with the largest market share, 26.3%, followed by BNZ on 21.1%, Rabobank 18.7%, ASB 16.9%, Westpac 15.2% and Heartland 1%. It was the first quarter of loan growth for some time because the dairy industry dominance has in recent times featured loan repayments from good milk payouts.
STATS: In the latest quarter of RBNZ reporting on agri-loans, dairy’s share fell by $199 million, whereas horticultural borrowing increased by $218m.
Milk forecasts go both ways Hugh Stringleman hugh.stringleman@globalhq.co.nz A PREDICTED slowdown in Chinese import demand for milk powder is why Rabobank has trimmed 20c from its farm gate milk price forecast, now $7.80/kg milksolids. The analysis of China’s needs and the cut in milk price expectation were done before the latest Global Dairy Trade (GDT) auction, in which the price index rose 4% and whole milk powder rose 3.3%. Rabobank senior analyst Emma Higgins says all eyes are on China, our key export market, as the risk of downside in the milk price forecast. “Supply is outpacing demand in China, with domestic milk production growth combined with growing inventories of dairy products,” Higgins said. “These factors point to the potential for a period of destocking later this year and into 2022.”
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Higgins says GDT prices had moved sideways or lower for the past six months, until the latest lift. “Despite last week’s lift, we see a strong possibility that the nearterm peak in global prices is likely behind us,” she said. “Our $7.80 forecast is at the lower end of all analysts’ expectations right now, but it would still be an excellent result for our dairy farmers – the secondlargest in Fonterra’s history.” Rabobank’s Dairy Quarterly Report said China’s own milk supply is growing 6-7% annually and its milk powder importing has been up 40% in the first half of 2021.
It forecasts that importing will fall by 18% in the second half to drive some destocking. Higgins also commented on other global supply and demand dynamics, which would influence the farm gate milk price. These include the shape of the NZ spring peak and how global dairy demand holds up in the face of reductions in fiscal aid from governments worldwide. High feed costs and growing margin pressure in the northern hemisphere may influence milk production, along with the added strain of inflation. But while Rabobank counselled caution, BNZ senior economist Doug Steel published an upbeat research note on the milk price outlook and raised his estimate 50c to $8.30. He says the balance of risks surrounding the milk price forecasts had moved upward and the $8.30 was not a precise estimate because of the time of the season and all the moving parts. “The bounce in GDT prices follows a general lift in global risk appetite over recent weeks helping underpin demand,” Steel said. There was firmness to the underlying demand and forward price curves showed high prices extending into next year. Fonterra had removed quantities of WMP from the GDT platform citing strong demand through other sales channels. Milk production growth in the European Union had been subdued. “We still don’t expect a strong global milk supply response to strong dairy prices,” he said. Even though the NZ season has started strongly and grass growth has been favourable in most of the country, BNZ doesn’t expect milk production this season to be greater than last season. That is due to good production last season and the trend to fewer cows. Steel pointed out that the NZD had risen 2.6% in value against the USD in the three weeks before the latest GDT event, which tended to work against the 4% index lift. In summary, “the dynamics and balance of risks appear to be changing with robust demand bumping up against subdued supply”.
