With a small percentage of farmers carrying a large percentage of the rural debt, views of the major rural lender need to be listened to.
Charlie Graham of ANZ National, like many sheep and beef farmers shares the frustration of lack of profitability in that sector, and he tells us that business leaders and the government are worried at the meat industry's inability to find long term solutions.
And he is reducing his banks exposure to the sheep and beef sector, with 50% less lending in that area than 15 years ago.
This will surely put pressure on farm land prices when participants in that sector have to exit.
So the question is, will the meat industry take the bull by the horns and work together for it's survival, or will it continue with its 'last man standing' attitude that will come at a great cost for many?
Charlie Graham speaks softly but carries a big stick. The man in charge of NZ's biggest agriculture investment pool, the $19 billion lent to pastoral farmers and fruit and vegetable growers by the ANZ-National banking group, is convinced something is "seriously wrong" with the meat industry. And if it cannot be fixed, the strong hint is that the bank's investment will go elsewhere reports The Dom Post.
He speaks in a quiet, measured voice and watches carefully as his words are taken down. But behind the banker's sombre bearing is a concern at the uncertain future his hill-country clients face. The meat industry is not doing enough to make more money for the 80 per cent of sheep farmers who are struggling, he says.
"If I'm a farmer on the hills, then I'm saying something is wrong. We've got the best in-market prices for lamb we've ever had and here I am quietly going broke," he says. What the industry needs is more collaboration among the companies involved in processing and marketing. "There's a lot of people in the supply chain who are doing all right – so there's not a lot of motivation for them to change.
Meat company mergers would help, but are not the complete answer. He says the meat industry's inability to find a remedy has government and business leaders worried. A farmer-industry taskforce is working on the problem with a consultancy firm and he is a member of an associated reference group.
"But if farmers aren't making money, we're not going to be so keen to lend to them. That would mean a lack of investment in the sector and drive further economic pressure. That reluctance to invest is becoming more evident. When he became head of rural banking for the National Bank in 1996, the lending book was split 50-40-10 between dairy, sheep and beef, and arable and horticulture. Now, it is 70-20-10.
He notes the meat industry's basic problem of having too many meatworks for a decreasing supply of lambs will be brought into sharper focus this season after storms caused an estimated 1.2 million lamb deaths in Southland and the lower North Island.
A lift in wool returns would certainly help hill country farmers, he says. But while he supports the proposed Wool Partners Co-operative, he wonders whether it will get the 50 per cent of the wool clip it is seeking."The investment for the average wool grower is not significant. It will be around $3000 for the first payment and another $3000 for the second, next May.
"One of the strengths of the agriculture industry is its core unit, the husband-wife partnership. It has a tremendous ability to hunker down and prune back costs when things are tough.One thing I've learnt over the years is to never underestimate the resourcefulness and resilience of people. You'd look at some of them, view their financial situation, and you'd wonder how they could survive. But they do."
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