INSIGHT
UPFRONT A2 MILK
Banking
ON THE LAND Despite some compelling arguments in defence of banks’ being overly watchful with agri lending, there are now some factors that should encourage banks to have lending conversations with farmers. By Phil Edmonds.
A
s 2021 draws to a close the prospects for farming couldn’t be rosier. But they also couldn’t be gloomier. That’s an interpretation of sentiment in the sector if on one hand you consider export markets signalling a near future of elevated farmgate prices, with ongoing contraction of bank lending to the agri sector on the other. The latter is potentially denying farmers the opportunity to capitalise on unprecedented levels of market support, and likely to be the cause for at least some of the gloom. Having farmers and banks able to better understand how they can succeed together might start to reduce those contrasting attitudes. The discrepancy between the existence of positive export market conditions and falling confidence among farmers is not new. But the contradiction was especially present in the findings of the Rabobank Rural Confidence Survey published at the end of September, where farmers were more embittered despite commodity prices rising with little sign of downside risk. Indeed, in October both ANZ and Westpac upgraded their 2021-22 farmgate milk price forecasts to $8.20kg and $8.50kg milksolids (MS) respectively and farmgate prices for lambs exceeded $9kg with further firming predicted. Some of the pessimism expressed through these surveys can be attributed to short-term disenchantment with the Government. But the component that specifically considers investment intentions is a more telling 14
Dairy Exporter | www.nzfarmlife.co.nz | November 2021
