Dairy farmers are being forced to sell farms as they find it too expensive to run their businesses, with milk payouts falling and banks examining whether they are cashflow positive reports Stuff. Since Christmas, banks had taken a much harder line with farmers, Manawatu-based dairy sector analyst Colin Riden said. The banks had pulled back on their lending into the sector and been tougher with farmers not paying back on schedule. So far there had been "quite a bit of denial" in terms of public acknowledgment by the banks that there was a problem. But banks had decided they could not continue to pour money into farms that would not return the investment, Riden said. "They've cut off so much credit that a lot of farmers are not paying their bills, that sort of stuff, forcing a few sales of holiday homes ... some farmers have been forced to sell [their farms]." ANZ National Bank rural banking general manager Charlie Graham said the bank had 40 per cent market share in the rural sector and had no intention of reducing that exposure.However, some farmers were experiencing real pain and some had overspent because of expectations of higher milk payouts by processors such as Fonterra. Since October, the bank had taken a stance to work through with customers to help contain costs and meet financing needs, he said. "I think any dairy farmer [could be hurting]. You don't need too much debt with the payout at $4.55 to start making a loss." There were some farmers for which it was "very difficult to see a future". South Canterbury Finance chief executive Lachie McLeod said it was hard to predict where Canterbury land prices would go because of the lack of sales within the sector as buyers pulled back. The Real Estate Institute of New Zealand's rural market report for the three months to May 31 shows a median price for dairy farms of $3.75 million down from $4.05m in May 2008, a 7.4% fall. McLeod said his company had little exposure to the dairy sector. Its total rural lending was about $145m out of a total lend book of $1.52 billion, and only $45m was directly into dairy. However, it would look to secure further good loans in the dairy sector, particularly with the long-term trend of increasing demand from Asian consumers.
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