FARMERS USED £351 MILLION IN CREDIT LAST YEAR

Taupo Times, Volume XIV, Issue 66, 24 August 1965, Page 3

FARMERS USED £351 MILLION IN CREDIT LAST YEAR

Total credit used by the pastoral farming industry last financial year was about £351 milJion. Seventy-two per cent. was secured by mortgages on land and buildings, banks provided 9 per eent. on overdraft, and 9 per cent. was ^ owing at some time of the year on current accounts with stock firms or dairy companies. Cash loans accounted for 5 per cent. and were provided almost exclusively by relatives and other private lenders, mainly for periods of less than five years.

These details are given in a report by the superin1 tendent of the biometrics - section of the Department of Agriculture, Miss J. G. Miller, on a credit survey .* made throughout the main farming areas by field ad-

visory officers of the department. • Thirty-four per cent of farms had no mortgage and 26 per cent were virtually free of all debt. • North Island farmers used bank overdrafts

more that did South Island farmers. The highest proportion of : overdrafts (about half) was for dairy farms and mixed sheep and dairy farms. • South Island farmers relied more on stock firms for short-term and seasonal finance. • Debt-free farms were by no means all fully developed. Though credit could be obtained for development, it was often not sought. The valuation of the debt-free farms was slightly below the average, except for some very large properties in the Gisborne-East Cape area. MORTGAGES Of the total amount owing on mortgage in 1963, State lending agencies provided 34 per cent. and private sonrces 43 per cent. On average the individual amounts owing to insurance companies were higher than those owed to government agencies or banks. The really big mortgages were held by relatives, many probably a father-to-son arrangement which would be cancelled by inheritance.

In the older-established listricts of central Auckland, Hawke's Bay, Nelson, Marlborough, Canterbury and Otago there were high proportions of mortgages from private sources and inter- j family dealings. Government agencies held a high percentage of the mortgages on land in the central North Island pumice country, where large areas have been developed by the State since the end of the Second World War. These mortgages were for long periods and balances were higher than average, probably because many are relatively new mortgages. There seemed to be a real shortage of mortgage i money in the Gisborne- j East Cape area and on the west coast of the South Island, becaujse of landtenure or development j problems. In these difstricts half of the farmjs had 110 mortgages. Interest ranging from 4i to 6 per cent was paid on two-thirds of the mortgage money, but on some more than 8 per cent was charged. Rates between 7 and 8 per cent were more common on extensive pastoral farms than on any other type. There was a relative lack of money available for terms of 10 to 20 years. A large amount was offering for j short terms or "on demand." OVERDRAFTS In most areas the average overdraft was just under £1000. Though in Canterbury and Gisborne-East Cape only a quarter of the farms had overdrafts, many were large (over £2000). In the sheep farming districts short-term and seasonal finance obtained from stock firms was often for very large amounts.

Half the accounts in Otago, Southland, Gisborne - East Cape, and Hawke's Bay were over £2000, elsewhere they were usually less than £500. Many Northland farms had current accounts with dairy factories, but usually the amounts were less than £500. There was a surprisirigly large number of deferred payments in Northland and on the west coast of the South Island. They related to a wide variety of goods and services, though outstanding amounts were usually small. Hire purchase was not an important method of financing among farmers, the survey showed, It was used mainly foi tractors and heavy machin ery used on contract work Seven per cent of farms had debts totalling more than three-quarters of theii estimated value; in a few in stances indebtedness appear ed to exceed the value o: properties Availability of credil seemed to be limited mainly by already high financia commitments or persona shortcomings.