A report earlier this month showed debt servicing costs were still looking lofty. Photo: 123rf.com
A rural lender says a profitable few years for the agriculture industry will pull businesses through the "tough" year ahead - but not all of them.
Agriculture-focused Rabobank will launch a series of free financial skills workshops for farmers across the country from next week, due to high demand from its clients for more advice.
They aimed to help farmers understand this season's numbers and plan for when cashflow deviates from their budget.
Chief executive Todd Charteris said rising costs and interest rates were biting into farmers' profits, but some had a nest egg put aside for a rainy day.
"There will be a number of businesses that will have benefited from strong cashflows and performances over the preceding years that can lean on that, but people are making some tough decisions in terms of where they're spending money and where they're deferring some things.
"It's going to be a tough 12 months, there's no question about that."
An ASB Commodities report earlier this month showed while key farm input costs had eased and strong population growth should relieve worker shortages, debt servicing costs were still looking lofty.
Charteris said while astronomical costs for things like fertiliser were coming down off Covid-19 highs, cashflows were still tight. But he said this had not led to a sharp increase in loans being piled up.
"At this stage we're certainly not seeing a lot of instances where people are having to increase facilities, they're really capturing it within their current working capital facilities," he said.
"Over the previous few years there's been a lot of profitability in farming businesses, so there's been a lot of headroom or liquidity created in their banking facilities - so if anything, they're eating into some of that headroom.
"Businesses are having a look at their numbers, reforecasting."
Hit to wider economy
Campbell Wood of farm financial management service AgriFocus said a handbrake on spending from agriculture would see the economy slow even further this year.
"Something everyone needs to be mindful of is that there's going to be a lot less money flowing through the economy from the ag sector this coming spring.
"They're going to have to be tightening their belts to make ends meet, so I guess the flow-on effect I think is going to be reasonably large."
Wood said there was stress on bottom lines this season, especially for those businesses leveraging debt.
"It's the ones that are carrying the high debt loading at the moment feeling the most pinch, hands down, because interest rates have over doubled in the past 12 months.
"It comes at a big cost to have farms fully staffed up now which is vital and needed, but it certainly hurts the bottom line a bit."
Rabobank's one-day financial workshops are free and open to non-clients - kicking off in Stratford in Taranaki next week.
