Start-up costs threaten ‘lost generation’ for NZ farming, ANZ warns

Start-up costs threaten ‘lost generation’ for NZ farming, ANZ warns

A ‘lost generation’ of New Zealanders are turning their backs on agriculture, as the current crop of farm owners ages while the cost of getting onto a farm soars beyond the reach of young investors, ANZ New Zealand has warned.

With the average age of a New Zealand farmer now topping 50, the amount of capital required by the next generation to buy a farm has soared to over $1 million, forcing many to seek other careers.

According to analysis by ANZ economists, a new farmer would need on average over $1m deposit to buy their first dairy farm (including machinery, stock etc); and at least $1.5 – 2m for their first sheep/beef farm.

"It’s never been easy to get onto your own farm and it’s not getting any easier,” says Graham Turley, head of the ANZ and National Bank rural lending operations. "The industry needs skilled young people to come in, develop business skills, accumulate capital, and take over as older farmers retire."

"Yet many in the next generation cannot see how they can raise the capital to gain ownership and control. They are no longer sure there is a fulfilling career in agriculture, and many of the best young people now see better options outside farming.”

The new farm start-up package, available through ANZ and The National Bank Agri Managers, is designed to help new farmers get started in their first independent farming position, for example as a contract milker or in leasing land, as a first step towards raising further capital and buying a farm.

The package will offer at least $60 million of new lending in the first five years to help new farmers start their first agricultural business, along with expert support including coaching and seminars to help them manage their business soundly.

"These loans can be used to provide income in the first few months of a milking contract," says Graham Turley, "For example until a seasonal payment kicks in, or towards livestock and essential farm machinery such as a tractor or farm bike."

"We expect that a large majority of these packages will be taken up for contract milking. But they are available to young farmers be they sheep, beef, dairy or horticulture."

"One of the keys to success is for new farmers to take up training opportunities to develop their business and farm management skills, and then apply these in their start-up opportunities" Turley said.

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The banks wouldn't have anything to do with enabling the inflation of the land value bubble would they?

Not that they are the only players in the whole dynamic.

Here's hoping the banks will show some sense in the lending they do - there are many contract milking positions where the contract milker would be better off on wages. I won't hold my breath though.

 

'Wither the homegrown talent?'

Outta here, unless they wish to be farmers.

The package will offer at least $60 million of new lending in the first five years to help new farmers start their first agricultural business,  

Are they ANZ/National having a laugh? When an enterprise such as Transpower, which is in essence a service/utility entity to farmers, expects to raise $3.0 billion over the next five years.   

Hey mr anz i want to become a first time bmw driver,can you set up a package for me to.

The reality is farmland has become a very sort after asset class in this QE world. Iowa cropping ground is up 31% for the oct 2011 year.In NZ its has averaged about 7% this year although still below the 2008 peak.

The romantic vision of a young person shearing or sharemilking their way to farm ownership has become much harder. Conversely as land becomes more widely held by non farmers the opportunity for those with the skills to manage said farmland on the owners behalf to provide the required returns is becoming increasingly valueable. The opportunities are absolutely there, its just they are in a different guise than the past. My brother inlaw from a city background with just 4 years farming experience has just landed a 6 figure salary package for next season to manage a new conversion.

 as Ambrose bierce's said,"History is just one damm thing after another, a chaotic jumble of geniusis and dolts,tyrants aand romantics,poets and thieves,accomplishing the extraordinary or scraping the barrel of depravity

History,n, an account,mostly false ,of events,mostly unimportant,which are brought about by rulers,mostly knaves,and soldiers,mostly fools.

there has never been a better time to go farming . With current payout and interest rates   a 50/50 sharemilker could borrow the entire sum needed to go sharemilking and still show a handsome profit.

BUT unless the loan is secured over land the banks won't lend more than 60% and they need outside guarantees. Cow prices have already come back around us by $300. That's a pretty big drop in equity if you've got 400cows or more and paid the high prices asked last year. Milk price is expected to drop to $6.10kg/ms for this season.

Sharemilking has a greater risk to equity drops.

there has never been a better time to go farming . With current payout and interest rates   a 50/50 sharemilker could borrow the entire sum needed to go sharemilking and still show a handsome profit.

Yes but SCF is no longer lending, why is that do you think. And what price were you putting on those cows. Oh and the important question, where are the 50/50 jobs, last year five 50/50 jobs converted to managers positions within 5kms of us. Infact there are now only 2 left near us.

This is after two years of getting stuck into farmers with good equity

Yep.  I don't see why they had to announce this at all.  They are trying to push what they see as their 'point of difference' - offering business seminars etc.  DairyNZ run two excellent programmes - Biz Start and Biz Grow - I would suspect that they will run rings around anything that the bank may offer.  ANZ are losing market share, this is just another round of PR spin.

Hahahahahahahaha... (sorry just had to get that out of the way)

Seriously, the work as a Rural Bank Manager that you had to go through to get $10k approved for a first time contract milk position is laughable. Personal guarantees, budgets, referalls from 2 previous employers, demonstrate how by not lending we could lose a larger customer and a really good story as to why they needed the funding (as why couldn't they fund it themselves - did they have a savings record).

ANZN's Lower Order Policy originally stated that no unsecured lending >$5k. Secured lending was only against those assets above $10k in value (utes etc) and extended at 40%. Also, that no fixed terms acceptable and an additional 2% had to added onto floating rates to represent the risk.

Turley wouldn't know sh*t from shoe polish.