NZ Debt write off

[Banana Bar]

I read somewhere recently that when support was removed from NZ farming debt was written off at the same time. Seems unlikely, did it happen?

BB

 

[Irish NZ]

First I've heard of it. I wasn't here at the time

 

[An Gof]

I read somewhere recently that when support was removed from NZ farming debt was written off at the same time. Seems unlikely, did it happen?

BB

Not much help if you haven't any debt.

There's an old saying down here "Don't blow
further than you've got wind".

 

[FonterraFarmer]

Think what your thinking back in the late 80's was more allong the lines of farmers in debt where the banks forclosed on them, the farms were worth less than the debt owed, said farms were sold and the farmers either were left bankrupt or broke, with no chance of the banks recovering the balance, I believe they were written off as bad debts. So no truth to the notion that all farm debt was wiped off after deregulation and rogernomics. If you had debt and could pay it, you had to pay it. My understanding is this kind of situation was worse for sheep and beef, and relatively uncommon in dairy.

 

[FonterraFarmer]

I read somewhere recently that when support was removed from NZ farming debt was written off at the same time. Seems unlikely, did it happen?

BB

Can you find a link for were or who wrote that? Not from somewhere in south west Wales by any chance?

 

[neilo]

I read somewhere recently that when support was removed from NZ farming debt was written off at the same time. Seems unlikely, did it happen?

BB

I seem to remember @Global ovine , who had just bought a farm on borrowed money at that time, saying that interest rates skyrocketed. As @FonterraFarmer posted, I suspect the only debts written off, where those where the bank foreclosed and didn't have any hope of recovering it, as would happen here.

See Murray, I do listen.....

 

[Banana Bar]

I seem to remember @Global ovine , who had just bought a farm on borrowed money at that time, saying that interest rates skyrocketed. As @FonterraFarmer posted, I suspect the only debts written off, where those where the bank foreclosed and didn't have any hope of recovering it, as would happen here.

See Murray, I do listen.....

That would make more sense.

 

[FonterraFarmer]

I seem to remember @Global ovine , who had just bought a farm on borrowed money at that time, saying that interest rates skyrocketed. As @FonterraFarmer posted, I suspect the only debts written off, where those where the bank foreclosed and didn't have any hope of recovering it, as would happen here.

See Murray, I do listen.....

Everyone remembers the first mortgage rate in the high 20's, but second mortgage were over 30%. But in saying that , the BNZ and Rural bank would have been government owned back then , so any bad or written off debts would have been indirectly at the taxpayers expense, would that be right ? @Global ovine (I'm not that old enough to remember that finer detail)

 

[BLG]

The Rural Bank as it was know was government owned and had subsisdised rates, then during "rodgernomics" as it was know after 1984, it was sold to the ANZ bank which put the rates up to market values. I always remember my father getting the letter telling him that his interest rates had gone from 6% to 22%!!

 

[former farmer]

Take a look at "When the Farm Gates Opened" by Neal Wallace, copies available on Amazon.

This gives an indepth look at the repercussions that followed 'Rogernomics'.

 

[Kiwi Pete]

The Rural Bank as it was know was government owned and had subsisdised rates, then during "rodgernomics" as it was know after 1984, it was sold to the ANZ bank which put the rates up to market values. I always remember my father getting the letter telling him that his interest rates had gone from 6% to 22%!!

I think that report you attached on the other thread, mentioned about 20% of rural debt was written off? Will have to go back and read it again to be sure.
1% went bankrupt
6% of farmland area changed hands

Or something similar.

 

[FonterraFarmer]

Take a look at "When the Farm Gates Opened" by Neal Wallace, copies available on Amazon.

This gives an indepth look at the repercussions that followed 'Rogernomics'.

Good book that, its based from a farmers perspective rather than a technical analysis.

 

[unlacedgecko]

The Rural Bank as it was know was government owned and had subsisdised rates, then during "rodgernomics" as it was know after 1984, it was sold to the ANZ bank which put the rates up to market values. I always remember my father getting the letter telling him that his interest rates had gone from 6% to 22%!!

That's eye watering! It's testament to the resilience of the average kiwi farmer that only 1% went bust.

If something similar happened in the UK today it would be a cataclysm and there'd be a hell of a lot more blood on the carpet.

 

[S J H]

That's eye watering! It's testament to the resilience of the average kiwi farmer that only 1% went bust.

If something similar happened in the UK today it would be a cataclysm and there'd be a hell of a lot more blood on the carpet.

I don't know if it's more the fact that it was 1984 rather than today, they're must be a hell of a lot of borrowed money with all the dairy conversions.

The family I worked for had bought 1000 acres during that time, when interest rates were 17% iirc, but they'd paid for it outright.

 

[Global ovine]

I seem to remember @Global ovine , who had just bought a farm on borrowed money at that time, saying that interest rates skyrocketed. As @FonterraFarmer posted, I suspect the only debts written off, where those where the bank foreclosed and didn't have any hope of recovering it, as would happen here.

See Murray, I do listen.....

You have had plenty of opportunities to take it in Neil.......

In reply to the OP:
I know of no cases where debt was written off by a bank. It may have happened within families to save a son/grandson/newphew from losing their farm, but banks were not in a position to write off debt because their investment in the farming industry (mortgage value) had also taken a massive hit. The BNZ needed a massive handout by the NZ Gov't after a few years, showing that banks without international security were left with an empty bucket.
What did happen after a couple of years when the forced sale of farms looked to be accelerating, was the NZ Gov't via the state owned Rural Bank arranged for the debt of qualifying farmers, irrespective of the bank owning the mortgage, to restructure the farm debt by extending the terms of the loan and reducing the interest rate to more reflect the adjusted risk of the new situation. This action saved as many farmers as the lift in product prices after a few years.
Unfortunately I didn't qualify for debt restructuring as I was the working partner of an equity partnership and we had the land owned separately in a company set up to protect ourselves and my partners existing farm businesses. So despite trying to be wise in the pre-Rogernomic era, it bit us on the bum in the post-Rogernomic era making it a situation where we had to tough it out by firstly understanding where our money came from, cutting all unnecessary costs and getting on with the job, rather than whinging and not making changes to fit the new paradigm. Such lessons have since made my farming ventures profitable and look back at farming being very good to my family.. It is these lessons I have tried to convey to others, many of whom are struggling even in the current era of relative sublime opportunity.

 

[FonterraFarmer]

Take a look at "When the Farm Gates Opened" by Neal Wallace, copies available on Amazon.

This gives an indepth look at the repercussions that followed 'Rogernomics'.

Someone has actually read something that I've recommended!!! If thats a trend, I might have to be more carefull what I write of forums.

 

[Global ovine]

[QUOTE="unlacedgecko, post: 4170834, member: 19130"
If something similar happened in the UK today it would be a cataclysm and there'd be a hell of a lot more blood on the carpet.[/QUOTE]


I doubt that any re-adjustment of UK farming will be as brutal as that which occurred in NZ for the following reasons:

• The UK economy is not on the point of collapse as it was in NZ in 1984.
• UK agriculture does not rank as such an income earner, or pillar of the economy as it did in NZ at the time.
• UK farming plays a huge environmental role now, whereas that was not thought about in 1980s NZ.
• NZ is a new world farming country where change is the accepted norm, whereas the regional farming cultures are valued in the UK, even if they inhibit modern day more efficient practices. Hence a sound reason for some level of subsidisation.
• Many UK farms directly run uneconomic enterprises now, but are sustainable due to subsidies and other off farm incomes. Therefore the population affected are too many rural/semi urban communities. The resultant depopulation of NZ countryside would never be politically accepted in such a relatively densely populated old country as the UK. The UK has as many pedigree breeders as NZ has sheep and beef farmers indicating the scales involved.

If anything cataclysmic occurred it would be the result of much reduced assistance for environmental/cultural protection in face of reduced incomes from agricultural products, if major disruptions to existing trade arrangements occur, making the underpinning world prices collapse due to unsold perishable product looking for a market. A lot of trust and hope must be put on Brexit trade negotiators and which pawns they will let fall to protect their valued back row chessmen.

 

[Irish NZ]

I did live down the road from a dairy farm that went under back then. Story goes that he called up the bank manager just as they walked off the farm to tell him that "seeing as you own the farm and the cows you may as well milk them as well, its your problem now I'm off".

Old boss grew up on a sheep station in McKenzie country. His parents walked off of it with what they could fit in a car and trailer.

 

[Kiwi Pete]

There was a local chap who'd just completed massive alterations to his farm- (which was very diverse at the time-) including a dairy shed and piggery; debt was eventually written off after a catastrophic fire.
The insurance company had tried to wriggle out according to local legend, and the bank then chose to let them stay and wrote a large amount off the loan.

The only reason I know is, most of the old farming families completely ignored this family after that, purely out of jealousy I'd say.
Rumour had it their "boost" was around $2M, a huge sum in 1984! Would beg the question how much the bank had in the business to let them plug on??

That's the only instance I know of, locally; most simply stopped spending and wound up their cereal growing operation, focusing on sheep and improving their productivity.

 

[Kiwi Pete]

Another couple of quiet points of difference between 1980s NZ and UK 40 years later:
Technology advancements!

Genetic advancements!

PRIOR WARNING - which NZ farmers didn't really have, other than by watching the annual budgets' decline- on the only TV channel on air at the time..

NZ had only had a relatively short period of specific and direct ag subsidies- which grew hugely over the course of the 70s- eg weed management sub, fert subs etc,,, not perhaps long enough to really become reliant on them?
1973 to 1984 isn't spanning generations.

But possibly the main contrast of all is simpler livestock systems here, and fresher soils, some had only the one dressing of lime+superphosphate by plane while the sub made it economic to do so. Much less adjustment was required to meet the lower cost production models that have always been 'the norm' here.

It really affected those who were spending money they hadn't made, or caught in an expansion phase - expansion that possibly wouldn't have happened without the SMP, due to falling wool prices etc?

But most of the farmers in our local area simply got the plane in and put on fert, helicopter sprayed the gorse, and bought a boat!!
There were 3 boats in our district called "S.M.P."