Farmers to tighten their belts

The time of milk and honey could be over for the south as the global credit crunch brings lower commodity prices and a warning to banks to curb their enthusiasm for the dairy sector reports the Southland Times. "The Reserve Bank considers that agricultural lending has become a riskier component of bank balance sheets, that should be managed carefully," the report says. National Bank chief economist Cameron Bagrie said the turmoil in the international markets was hitting dairying particularly hard. He expected payouts to "have a five in front of it" rather than their current $6.60 mark. "Banks will curb their lending, you're in a completely different economic environment at the moment, there's a lot of uncertainty around the globe and you're seeing a lot of pressure on commodity prices and dairy prices are leading the charge," he said. "For the typical dairy farmer who has been in it for donkey's years a $5 payout is still money for jam. For someone who has jumped in late in the economic cycle there's going to be a bit of stress and you're going to see the cheque book put away." Farmers would have to "tighten their belts" during the next two years, but the long-term prognosis for the industry was still good, Mr Bagrie said.