Farmer Satisfaction With Banks Continues To Slide, Feds Survey Shows

Farmers’ satisfaction with their bank relationship continues to slip and more perceive they are under undue pressure, the latest Federated Farmers Banking Survey shows.

Although a majority of the 1,017 respondents to the May survey remain satisfied with their banks, with 56 percent very satisfied or satisfied, this was down 3 points from the previous survey in November 2022 and is the lowest since the biannual surveys began in May 2015.

"Interest rate and cost increases are making it tough for many New Zealanders and businesses and the rural sector isn’t immune," Federated Farmers President Wayne Langford said.

"But the survey results indicate the banking sector has work to do lifting the standard of their liaison and service to the agricultural sector.

Many respondents were complimentary about their banking relationships, but others highlighted the size and speed of interest rate increases on top of continued concern about banks’ tough lending policies for rural purposes.

"Also mentioned was less frequent communication, bank branch closures and consolidation of rural staff into larger centres more remote from rural areas, high turnover of bank staff and staff having less understanding of farming," Wayne said.

Arable farmers were the most satisfied of industry groups, while Sharemilkers were the least satisfied, with barely half saying they were very satisfied or satisfied.

24 percent of farmers perceived they had come under undue pressure from their banks over the past six months, up 6 points from November 2022. All industry groups had higher proportions compared to six months ago and all were over 20 percent. Dairy farmers felt the most under pressure and Meat & Wool farmers felt the least pressure.

Some 44 percent of farmers felt their mental wellbeing had been affected by their debt levels, interest rates, changing condition, or other forms of pressure, up 3 points from six months earlier.

"With banks making healthy profits, we don't want them to be forgetting our rural communities and suggest reinvestment in extra customer service at this time," Wayne said.

"When times are tough, good communication is even more important, but our May survey shows farmer satisfaction on that front has slipped a bit more, continuing the decline of the last five years."

Other key results from the Federated Farmers survey:

• 79 percent of farmers said they had a mortgage, up 2 points from November 2022. Over the past six months, the average farm mortgage value has increased from $4.19 million to $4.31 million while the median increased from $2.50 million to $2.80 million.
• The average mortgage interest rate increased from 6.29 percent to 7.84 percent, up 155 basis points since November 2022 (and up 405 basis points since its lowest point in May 2021). Sharemilkers had the highest average of 8.41 percent.
• Overall, 2.1 percent of farmers were paying a mortgage interest rate of less than 5 percent, down from 10.1 percent in November 2022 (and from a peak of 91.5 percent in May 2021). Meanwhile, 1.8 percent were paying a rate higher than 10 percent, compared to 0.3% in November 2022.
• 74 percent of farmers had an overdraft facility, a little higher than November 2022.
• The average overdraft interest rate increased from 8.59 percent to 10.07, up 148 basis points since November 2022 (and up 379 points since its lowest point in November 2021). Dairy had the highest average of 10.49 percent.
• Only 0.3 percent of farmers were paying an overdraft interest rate less than 5 percent, almost the same as in November 2022 (and down from a peak of 20 percent in November 2021). Meanwhile, 35 percent were paying more than 10 percent, up from 14 percent in November 2022.
• More farmers had budgets compared to six months ago. This reflects tougher times financially from falling incomes and rising costs. 68 percent farmers had an up-to-date budget for the 2022/23 season and 41 percent had an up-to-date budget for the upcoming 2023/24 season. Both are record highs since the survey began in 2015.

© Scoop Media