RBNZ figures show agricultural debt with registered banks at the end of January 2009 had increased $407 million from December 2008 to be $42.691 billion - $8.41 billion more than one year ago reports Agricultural Production Economics. In January 1999 the total of agricultural debt with registered banks was only $11.198 billion. If we include debt with non-bank financial institutions the total figure is $43.908 billion "“ year on year a 22.9% increase. Compared to business with an increase of 12.2% or households at 3.8%. Are these numbers important? Have we become insensitised to the size of NZ agriculture's debt? The government departments who one might expect to be critically concerned don't appear to be. The farmers and financiers at the sharp end of an industry meltdown in asset values are though acutely aware. Apart from identifying the major fall in farm values, two other critical points are made: Dairy farm sales have virtually dried up (40 sales in NZ for the last 3 months compared to 159 for the same period one year ago, and only 9 sales in January) and; The higher intensity, higher cost milk production is being cut back because it is not profitable. Agricultural debt is dominated by dairy "“ to the extent that it made up 61.5% of the total when the RBNZ last provided a breakdown. On that basis dairy farms now owe financial institutions about $27 billion. The $17 billion debt for the rest of agriculture is difficult to separate given the limited data we get so at times must be considered to broadly reflect dairy debt, or sometimes simply as noise. The three months to the end of January 2009 was a period typically with low requirements for additional credit. There were virtually no farm sales, and no drought. Dairy farm development had largely ceased. Sheep and beef prices were good, and Fonterra made progress payments on the basis of early predicted higher payouts. Low world demand for dairy commodities didn't impact farmers as Fonterra simply stockpiled product. Banks restricted lending to agricuture as much as possible.
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