Agri-businessman Stuart Nattrass has some sympathy with Macquarie Group's concern about the growing level of farm debt in NZ. Mr Nattrass, who is also a Fonterra director, said in an interview there was little doubt some farmers had debt exceeding what current earnings could service, but he said that did not spell the end of dairy farming as implied by the Macquarie report. "You'll never see an empty farm in NZ because people always occupy land to produce something off it," he said. As with any market, some people would lose money entering or exiting a farming business and there would always be change in land use such as the change from sheep to grapes in Marlborough and Central Otago, or sheep and beef to dairy in Canterbury, Otago and Southland reports The ODT. "The question is which industry provides the best returns and gives growers the best opportunities, and nothing suggests that anything other than dairy does it better." The amount of borrowing by the dairy industry might put some individuals at risk, but not the industry. "To claim it puts the [dairy] industry at risk is a nonsense. The $800 million Fonterra raised through bonds replaced bank lending. The $4 billion raised in debt between July 31, 2008, and January 31, 2009, was within Fonterra's equity ratio limits and the spokesman said the company was improving that ratio. Macquarie also criticised Fonterra for raising bonds without releasing its half-year result, but the Fonterra spokesman said the company did not have a final milk price or its cost of goods for the year at that stage. An analysis compiled by investment banker Macquarie Group and published on the Agricultural Production Economics website said dairy farmers owed more than $27 billion, with the most indebted third accounting for three-quarters, or $20 billion, of that total said the ODT. The analysis was critical of bank lending and a continued focus on linking farm viability with capital gains, a trend it said was coming to an end. It was also critical of Fonterra, saying it had not been transparent in revealing its borrowing, and it was "absolutely dependent" on its milk price. More than 61% of agriculture's current $43.49 billion of debt was being carried by dairy farmers, with some of the most heavily exposed having debts equivalent to more than $50kg of milk solids (kg/ms).
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