Agriculture News: Interest Rates On The Rise Again

UHY Agri Logo FINALUHY Haines Norton Director Mark Foster provides a summary of current farming issues.

Most commentators are predicting further rises in interest rates through to the end of the year.  Although this does not directly affect mortgage borrowers who have fixed most of their debt, it does affect the exchange rates as the New Zealand economy becomes more attractive to overseas investors.

The outlook is not so rosy for the highly indebted dairy farmer, because not only does the milk solid price drop (due both to the high NZ dollar and increased supply from offshore competitors), but the cost of borrowings go up.Mark Foster

Total farm debt (mainly dairy farms) currently stands at NZ$52 billion, and an increase in interest rates will drive up interest payments by approximately $300m.  This will put extra pressure on some already under-capitalized farms.

On a happier note, the mood at the recent Fieldays was buoyant again this year with exhibitors generally seeing good results compared to previously despite the potentially rocky times ahead. Numbers on Wednesday and Thursday were both down due to bad weather but Friday was absolute carnage with traffic backed up for approximately four hours in the morning!  However once you arrived on site the wait was certainly worth it, especially given the great weather over the weekend.

The weather has also been particularly kind this year and apart from the two brief cold snaps we had (which killed the kikuyu); the rest of the time the weather has been behaving.  Grass growth around the Kaipara and further north has been great after the lengthy drought experienced by most.  Here’s hoping it lasts well into July.

UHY Director Mark Foster can be contacted at markf@uhyhn.co.nz.

2014-07-08T11:56:43+00:00July 8th, 2014|Farm Accounting|

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