Rural lender Rabobank NZ watching evolving trade implications after Fonterra dairy product recall

By Gareth Vaughan

Specialist rural lender Rabobank New Zealand is closely monitoring the effects of Fonterra's recent botulism scare, including evolving trade implications, given its significant dairy sector exposure via loans to farmers.

In its latest General Disclosure Statement Rabobank notes the revelation on August 3 by Fonterra of possible contamination of whey products leading to dairy product recalls across eight countries.

"The Bank has a significant exposure to the New Zealand dairy industry via loans made to dairy farmers," Rabobank says.

Rabobank says it has closely monitored developments, and thus far assessed the long-term financial impact on dairy farmers, and therefore itself, to most likely be immaterial.

"However, the trade implications of the contamination event continue to evolve and remain difficult to predict. In the event that substantial and prolonged trade barriers to the New Zealand dairy industry are put in place, a greater financial risk could emerge for dairy farmers, and subsequently for the Bank," Rabobank says.

Rabobank has $8.9 billion, or 87%, of its $10.3 billion total credit exposures to the agriculture sector.

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