When the going gets tough – the tough get going

This is what seems to happen when farmers come under financial and farm pressure.

With the rapid fall in the payout, massively increased on-farm costs and high debt, this has been a recipe for some very stressful and difficult times for farmers.

I thought I would traverse some of the misconceptions and pressurised decisions that seem to be made.

Recently a farmer had been refused an increase in overdraft to run his business, in fact the Bank told him to put the farm on the market and they would be back in three weeks to look at the progress. Interestingly he was fretting that a Receiver would show up any day and take over his business and kick him off his farm.

The reality is that it takes a long time for a receiver to be appointed and this is done only after months of failed negotiations. It is normally associated with a farm that is held in a company. It may occur under the General Security Agreement or GSA. Fortunately we may be able to refinance this farmer away from his existing Bank .

Banks are very aware of bad publicity and suicides and really want to cut a deal so that the farmer can accept.

So many farmers see pressure from the Banks as a signal to go harder. More cows, more production to service the debt. They just seem to want to go harder and faster rather than face the reality.

The reality may be that they have borrowed to Bank maximum levels and there have been some cost over runs or disasters which have increased debt. The farmer also appears to feel disconnected from Fonterra (who in my opinion need to improve their individual farmer contact) and therefore the farmer feels isolated.

The solution is not to go harder, but start a process of meetings with a clear outcome. The best place to start is with your Accountant. If he is not listening then talk to your consultant or find somebody suitable who can help. You need to sit down and do a Statement of Assets and Liabilities (no bullsh... either). Then look at the budgets, take a big breath and get a realistic view. Can you survive this or is it terminal? Remember the Banks have first dibs on everything. Then make arrangements to have a meeting with your Bank and thrash out a plan you can both live with.

The Banks now have specialist people for these particular issues. They may have to write-off some of the debt. They may leave you with some property or cash.

They are much more likely to do so if you have professionals helping you because they too want to "save face".

For some, these are incredibly tough times with highly geared farms, dry conditions and bank pressure.

The banks will have already been around and looked at their lending book and identified those which are "hospital cases". Once identified, they will start a process to get them out of their "hospital ward" and back on their feet (or terminal).

In summary, when the going gets tough the solution may not be to go harder.

It may be to stand back and take stock and have a planned approach, using professionals so you can get out of the bank's hospital beds.


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