Dairy farmers have more than doubled their borrowing in the past nine years but rising asset prices mean the debt-to-asset ratio remained steady writes the ODT. Figures provided by DairyNZ show that an average farmer's term liabilities have increased from $6150 a ha in 1997-98 to $14,450 a ha in 2006-07 but the debt to asset ratio over that period has been constant at about 35%. DairyNZ economist Matthew Newman said average farm values have increased at about the same rate as the increase in borrowings, but he estimated 15% of dairy farmers paid little or no interest while 10% paid 30% of their cash income on interest. Interest remained the single largest farm expenditure item, costing $1 kg milksolids having increased 30c a kg milk solids in the last five years. "At a $5 payout, 20% is used to pay interest, making it the single largest expenditure item on farm," he said in statement responding to questions. In 2006-07, when the payout was $4.13kg milk solids, Mr Newman said 23.3% of cash income was needed to meet interest payments. But, in 2001-02, when the payout was $5.28, just 11.4% of cash income was used to pay interest. The level of debt reflected the borrower's attitude to risk and with payout beyond farmer's control, he said they must be able to "ride out the tough times and capitalise on high payout boom years".
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.