By Bernard Hickey
Bank lending to farmers has fallen NZ$1.013 billion from its peak in September last year, Reserve Bank figures on sector credit for April show.
Fonterra is expected to pay out an extra NZ$2.2 billion to dairy farmers this year as a boom in commodity prices boosts farmer incomes, but doesn't necessarily boost farmer spending through the rural economy.
The government and many economists have expected much of the windfall gains from high commodity prices to help boost the economy generally over the next year to 18 months, but there are increasing signs that farmers are choosing to bank the receipts rather than spend it.
Many have long memories from 2009 and 2010 when banks enforced spending freezes or increased lending margins. Some are also wary of a rise in interest rates later this year and early next year.
There is also the prospect that banks may further increase lending costs for farmers and tighten credit because of changes to the 'capital overlay' rules for farm lending due to kick in next month. See our earlier article here on farm lending rules.
The sector credit figures showed agriculture lending falling to NZ$47.249 billion in April from NZ$47.480 billion in March and a peak of NZ$48.262 billion in September last year. It is down 0.1% from a year ago. This is the first ever annualised fall in farm lending since the series began in December 1990 when farm debt was NZ$5.07 billion.
Meanwhile, business lending rose to NZ$73.359 billion in April from NZ$73.091 billion in March.
It is up 1.0% from a year ago, the strongest annualised growth in business lending since July 2009.
Bank lending against housing rose to NZ$171.832 billion in April from NZ$171.588 billion in March, which represented a 1.4% rise from a year ago.
Consumer lending rose to NZ$11.891 billion from NZ$11.828 billion and is down 0.7% from a year ago. Total household lending at NZ$183.723 billion was up 1.2% from a year ago.
This means business lending rose NZ$268 million in April, household lending rose NZ$308 million and farm lending fell NZ$231 million during the month.