Business uncertainty shared by agriculture community: ANZ

The recently diagnosed cattle disease Mycoplasma bovis is contributing to uncertainty, the ANZ Bank says. Photo / Duncan Brown

Dairy farmers are relieved to be back in the black after a long, tough time but uncertainty in the wider business sector is also felt in the agriculture community, says the country's biggest rural lender ANZ Bank.

Managing director, commercial and agri, Mark Hiddleston, said two days at Fieldays showed him there was great relief at the recovery in milk prices but also "conservatism" about what was ahead and a general lack of confidence among some farmers.

The global economy and the recently-diagnosed cattle disease Mycoplasma bovis was contributing to that uncertainty, Hiddleston said.

"But we certainty don't see, at this stage, a material impact on the industry [from M. bovis]."

Land prices were also a focus.

"There's no public data out yet but through the Gypsy Day's period [late May, early June] prices held up well for well-run, well-presented farms but there are some which haven't got their new environmental plans and didn't have certainty about future productivity or land use - the prices on those came off a bit.

"So there is a bit of uncertainty about what you have to do to get organised."

Farmers were also questioning what effect the removal of foreign capital from the real estate sector under the Government's new Overseas Investment Office regime would have on land prices.

A rumour at Fieldays was that banks were demanding principal repayments from cattle farmers because of jitters over M. bovis.

ANZ Bank managing director, commercial and agri, Mark Hiddleston. Photo / Supplied

But Hiddleston rejected the notion in ANZ's case. The bank had only recently offered to help any affected clients by postponing their repayments, he said.

"The two aren't linked at all but I'm not going to pretend we aren't having a conversation with our customers that it's been a tough three years, we're coming through it, now let's have a chat about the balance sheet ...

"With most farmers we don't need to have the conversation - the first thing they want to do [with improved cashflow] is pay off their overdrafts.

"We're just going into planning our customers as they think about the 2019 year but also about the environmental [obligations ahead] and M. bovis."

Asked about ANZ's response to the Government-primary sector decision to try to eradicate M. bovis with a mass kill of potentially infected animals, he said the bank was supportive but realistic.

"We have a very short window to try, so it's a great opportunity. It's a 50:50 chance. If we fail, and we will probably find out in the next six to nine months, then we're going to have to learn to live with it.

"I like to use the kiwifruit [sector] example - they had a really good go at trying to eradicate but while they were doing that they were also learning to live with it."

Hiddleston said the bank had been doing a lot of work around the farming sector's transition to more sustainable farming practices.

Its farmer-customer survey showed strong awareness of the shift.

"Over 90 per cent were very aware and over 90 per cent were doing something [about it] but they were looking for help with the 'how' ... what are the technological or precision-farming investments I should make which will not only help me comply and record what I'm doing, but actually help me make better decisions so I can put the environment at the heart of my farming model?

"That's where I think there is still uncertainty.

"They also understand there is a cost to this transition. They articulated a $10,000 to $20,000 investment every year - I personally think it will be a bit more than that. When fencing and planting is done they have to think about more investment in technology.
Some of that might be higher [cost] but the returns are greater."

Hiddleston said he detected a "maturity" of thinking and planning around the transition compared to six months ago.

"Once the planning is in place they can start investing and start to see in real terms the environmental thing in front of the agriculture models. That's got to be good in terms of meeting consumer expectations and improving waterways.

"I came away [from Fieldays] with quite a different feeling from last year in that regard and if we harness that, the likes of Fieldays will continue to be a great focus point for the 'how' we get things done.