Accountants doubt 35 Southland farms being forced to sell

Rural accountants have doubts about farms being forced by their banks to sell.
ROBYN EDIE/FAIRFAX NZ

Rural accountants have doubts about farms being forced by their banks to sell.

A claim that about 35 Southland dairy farms could be forced to sell at the end of the season appears to be unfounded, Southland-based rural accountants say.

Last week a Christchurch accountant said dairy farmers could potentially be "low-balled" for their farms at the end of the season if a glut of farms end up on the market, while Southland-based real estate agents sid that while the market was quiet, there did not appear to be much evidence of low-ball offers coming in.

Fonterra's payout is at $3.90 kilogram milksolids (kgMS), while DairyNZ predicts a break even milk price for the average farmer of $5.25.

Crowe Horwath managing principal Neil McAra said with only about 40 dairy farms on the market in Southland, it was unlikely 35 dairy farmers were being told by their banks to sell at the end of the season.

"If 35 farmers have to shut up shop they have to be on the market now."

The current dairy season ends on May 31.

READ MORE: Dairy farmers potentially 'low-balled' for their farms, 35 Southland farms told to sell - accountant

If farms were not already on the market, they were likely to have to continue to work their stock and employee staff through to the next season, McAra said.

Crowe Horwath had a large farm clientele and McAra was not aware of a large volume of farms being forced by their banks to sell.

"We aren't seeing any data that shows 35 or anywhere near 35 are being forced to sell."

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There would certainly be farmers deciding to sell, but it would only be a small number and most would already be on the market, he said.

He suspected the farmers who had come into the dairy industry most recently would be the most at risk of having to sell because they had come in on a high cycle and would be carrying a lot of debt through the low cycle, he said.

There were about 45 dairy farms listed online for sale in Southland in March, compared to about 64 in January.

Malloch McLean partner John Schol said despite there being a lot of dairy farms on the market, it did not mean they were necessarily being forced to sell.

The peak of dairy farms on the market was in January, when more than 60 dairy farms were on the market, he said.

Schol said Malloch McLean had a wide network of banks, real estate agents, lawyers and farm consultants who were all seeing very few farmers needing to sell their farms.

"What we're seeing with our clients ... we don't know many at all that need to sell."

Some Southland farms were being managed by the banks, but it was not a death sentence and many would get control back when the outlook was more positive for them, he said.

"I'm not surprised there are a few people in the industry that are in really tough times."

The rural sector needed strong governance structures and good operating systems to effectively ride out downturns in the dairy cycle, and most of Schol's clients were just riding through this cycle hoping it would come back again next time, he said.

"When an industry is in a downturn there's always going to be a struggle."

Malloch McLean rural services manager Tim Driscoll said being in the second year of a low payout and looking down the barrel of a third, was making farmers look at the way they ran their business.

 - Stuff

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