Tough talk from National Banks rural manager

Many farmers are going to have to make some tough choices, warns Wayne Hawkins, the senior rural manager with the National Bank of New Zealand in New Plymouth. In a sometimes hard-hitting address to about 20 people at a recent seminar at Oakura reports the Taranaki Daily. Mr Hawkins warned that in the prevailing tough economic climate, farmers need to sort out their priorities. For many, this means reducing farm costs and cutting back major expenditure, including on wages, fertiliser, repairs and maintenance and expensive bought-in supplements. "That's the sort of choice that some people are going to have to make if they want to keep their farm. Do you want to keep the farm or do you want to set it up for somebody else to buy at a fire sale price? "There are big savings to be made in feed. If you are not doing your weekly farm walk, how the hell can you manage your pastures properly? These are just fundamental things which we all know - a weekly farm walk, feed budgeting and, if you are doing that right, a bit of nitrogen here or there maybe to fill a hole three or four weeks out. You don't have to get into the high- cost supplements. "Fertiliser and nitrogen can also be cut back. Have a look at your soil tests. If you have an Olsen P of over 30, in a survival situation, how much can you cut that back? I would suggest that you get out with your fertiliser representative and have a look at it. Some paddocks won't need fertiliser - others might. Use your head in those sort of things. "We have been talking to our clients since late last year and some still, after three or four visits, don't appreciate the situation that they are in. The danger is that if you put your heads in the sand and think things will go away, that won't happen. So all I would say to you is work out what your current reality is. Unless you know where you are starting from, you won't have a clue of where the hell you want to get to. "In the 2007-2008 season, our clients had farm operating costs from less than $2 per kilogram of milksolids to over $6. That's excluding interest. That's farm operating costs." The best situation is to keep cashflow positive, or at least break even. Increasing debt won't be possible for many, he said."Land values off their peak have probably come back somewhere between 20 per cent and 35 per cent, depending on where you are. So had somebody borrowed up to the maximum level that the banks were comfortable with, which would be about a 60- to 65-per cent security margin, there is no capacity for the banks to lend in a lot of situations.  A particularly sensitive issue with many farmer clients, he said, is that of personal drawings. The average personal drawings of over 300 New Plymouth branch dairy farm owner clients in the 2007/08 year with his own bank were $92,000, but 65% of clients drew more than $100,000. "I couldn't care less what they spend, as long as they are aware of the consequences. Some figures quoted by one of my staff members said that 4 per cent of people in Taranaki earn between $50,000 and $70,000 and only 4% earn over $100,000. Yet 65 per cent of our clients spent over $100,000. "What's important to you? Keeping the farm? Keeping the kids at Auckland Grammar?