Farm debt keeps rising which worries Carter

Latest Reserve Bank figures show agricultural debt continues to balloon at 14% a year and Agriculture Minister David Carter says he is concerned. Carter says it is "˜considerably driven by dairy' but is not just an on-farm issue, with cooperatives and service companies also heavily borrowed reports The Rural News. "˜This rural indebtedness runs right across the service sector,' he told a recent deer focus farm meeting. Latest Reserve Bank figures show agriculture owed $46.6 billion at the end of July, up $523 million from June and $5.9b from July 2008. This is in contrast to household borrowing, which is more or less static, while business debt is falling. However agriculture's 14.4% year on year increase is the lowest since January 2008 and Carter told Dairying News he believes that growth can be reined in. Recent increases are largely due to overdraft extensions to get through this season, not new borrowing, he maintains. "˜I think you will see that rate of increase arrested. We have an improving dairy outlook and sheep and beef farmers have returned to profit.' Carter met with banks early in the year and received assurances they would "˜stick with New Zealand'. He urged that "˜if adjustment is needed on some over extended dairy farms that process needs to be very orderly'. "˜We are dealing with a very few farms in this situation.' That message appears to have been taken on board by banks and farmers need to focus on a drive for profit, he says. With dairy prospects reviving as indicated by the past two globalDairyTrade results (see page 4) the industry must not get carried away again. "˜I think we need to be very careful about rushing to more conversions [to dairy]. We need to take a longer-term perspective of where dairy prices will settle. $7.90/kg was, with hindsight, an aberration.'