This is the release announcing the Federated Farmers latest half yearly banking survey.
Many farmers are taking advantage of strong returns for meat and milk to pay down debt, the latest Federated Farmers Banking Survey and Reserve Bank of New Zealand (RBNZ) data shows.
Reserve Bank data that shows total agricultural lending dropped $1.4 billion to $61.2 billion in the year to April 2026.
"Strong dairy payouts, including a capital redistribution of $2 per share to Fonterra suppliers, combined with record beef and sheep farmgate prices, have likely allowed farmers to meaningfully reduce loan principal," Federated Farmers banking spokesperson Mark Hooper says.
Responses from nearly 540 farmers to the Federated Farmers Banking survey in May also show falling farm mortgages and improved farmer-banker relationships.
In the Feds survey, the number of respondents with mortgages under $2 million has risen to 41%, up from 38% six months earlier.
Average mortgages for sharemilkers and for dairy and meat and wool farms all fell significantly between the November 2025 and May 2026 surveys.
"The outlier is arable farms," Hooper says.
"That sector is in near-crisis mode, with weak grain prices, rising costs, tough growing conditions and competition from lower cost imports.
"The arable farm median mortgage of $3.5 million is the highest of all farm types."
Other key survey results tracking the farmer-banker relationship continue an upward trend.
Farmer satisfaction with banks reached 69% in May, the highest rate recorded in the last eight years of Federated Farmers’ twice-a-year surveys.
The survey shows banks have lifted their game on the communication front.
Farmer satisfaction with their bank’s communication is at 69%, up from 61% in the November survey.
Another positive is that the number of farmers who said they were feeling undue pressure from their bank came in at 10%, the lowest since 2018.
The average mortgage rate was 5.49%, down from 5.78% in the November survey, and two out of five respondents to the May survey have over 75% of their loans on floating rates.
"One finding that all banks should ponder: the single most consistent theme across more than 200 general comments added by farmers was that a knowledgeable, available bank manager outweighs factors such as loan rate competitiveness," Hooper says.
"Where communication from banks works, it tends to reflect a specific person rather than the bank system. Where it fails, the cause is usually the same."
3 Comments
Average mortgage $4.1m...eye watering.
I wonder what the break down is between dairy and shee/beef.
Back in 1970 Dad bought a second farm, 1200 acre run down east coast hard hill country block. In typical family farm ethos, 3 of his 4 sons would knock it back into shape - fencing, scrub cutting, regrassing (D4 + 6 aside giant discs, etc), tracking, dam building, sheep and cattle yards. And we did.
He paid $120,000 land, buildings ($70k) and stock ($50k). Its probably worth $3.5m just for land now. Makes me ponder on how that works financially. Land value increase of x50 isn't matched by stock, meat and wool values increasing x50. I guess it comes down to cash flow and margin over debt servicing and operating costs. Banks are on the sheep's/cow's/pig's back there.
A part explanation could be that farmers farm for capital gain and that it's part of the herd mentality? If farmers didn't borrow heavily banks would have little leverage over them.
Don't know any recent farm purchases in my area for capital gain. But keep playing this outdated tune.
Any capital gains in the past ten to twenty years have been almost exclusively due to land use change. Beef to dairy, dairy to subdivision, sheep and beef to carbon credits or alternatively due to productivity gains.
The previous comment about justifying recent farm values on hard beef and sheep country - is you can't - that's why they were vulnerable to pine trees.
However there are a lot of smart operators making both a decent living and good returns on their farms, supported by banks applying sound business practices to their lending. The reduction in interest only financing to insisting on capital repayments is another indication of this change in focus.
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