All eyes on next month’s OCR review

• Published date: 18 January 2023
• Publication title: Central Rural Life

Rising farm costs and other financial pressures are combining with Government policy to weigh heavily on their minds

Two surveys back this up with Federated Farmers results showing the average farm mortgage value has increased from $4.07million to $4.19million, while farmers told Rabobank their confidence was now at a 20-year low.

About 75% of them expected conditions in the agricultural economy to worsen — up from 43%.

Federated Farmers found farmers were being squeezed by rising interest rates, with debt or other financial concerns eroding their mental wellbeing.

Its banking survey of nearly 1200 farming businesses showed average mortgage interest rates had increased to 6.29% in November from about 4.6% in May.

Reserve Bank figures now put the average floating rate closer to 7.8% and a one-year fixed rate at 6.8% with farmers wary of further increases in its next official cash rate review on February 22.

Federated Farmers president Andrew Hoggard said the average overdraft increase of $46,000 to $328,800 was a reflection of the impact of official cash rate rises.

Many farms were carrying high debt, he said.

‘‘It’s not a surprise given those big numbers that just over 40% of farmers said they felt their mental wellbeing had been affected by their debt levels, interest rates, changing condition, or other forms of financial pressure,’’ he said.

The Government’s primary industries Situation Outlook Report highlighted the boost to the economy from an estimated record $55billion in food and fibre export returns by June next year.

However, farm expenses jumped 15% in the September quarter compared with the same period last year, led by a 53% rise for fuel, 37% for fertiliser and 34% for debt servicing.

Apart from Government policy and rising farm costs, the additional sources of anxiety identified in the Rabobank survey were rising interest costs and falling commodity prices.

There are now more than twice as many farmers expecting to reduce investment than those expecting it to increase.

Rabobank says confidence has plummeted further from low levels despite the rural sector performing strongly.

The end-of-year survey found farmer confidence was significantly down on the September quarter, with slumping confidence levels even falling below 2015’s dairy downturn.

A mere 4% believed conditions in the...