By Mark Kelly
David Bowie sang of “Pressure: pushing down on me”. For some New Zealand farmers, a lot of pressure comes from the debts they have built up.
New Zealand farms carry $61.93 billion of debt, according to the latest Reserve Bank data. That figure has fallen slightly of late, with strong farmgate milk prices, and lenders encouraging principal reduction. But tension is growing as interest rates rise.
Beyond the figures, it is personal. Farm debt is not just a number, for the farmer or the lender. For the farmer, the debt supports a way of family life, a passion, and a commitment to the land. For the lender it represents a personal relationship, and part of a vital connection to New Zealand’s largest economic sector.
Farm debts can go awry. Farmers sometimes over-commit. Biohazards and compliance issues can add unexpected costs. Prices are subject to volatilities beyond anyone’s control. Lenders have limited control over interest rates.
The pressure can be immense. Yet farmers are often the type of self-reliant and indomitable people who are the last to ask for help. Mental health issues are a significant concern in the sector. Lenders can find it hard to get farmers to have those crucial conversations.
Against this backdrop, the Farm Debt Mediation Act 2019 came into force on 1 July 2020. The idea was to create a circuit-breaker in high pressure farm debt situations. A chance for folk to talk before things went too far.
The FDMA provides that:
- Lenders cannot take enforcement action on farm debt unless they have tried to mediate;
- Mediations are to be concluded in good time;
- Mediators must be FDMA accredited;
- The farmer gets to suggest three accredited mediators, and the lender must pick one of those three;
- Parties must act in good faith;
- There is no requirement for the parties to settle. If a lender attends a mediation in good faith, and it does not settle, the lender can enforce; and
- The mediations are paid for by the parties (but there is a $2000 cap for the farmer, and MPI can help with funding).
The FDMA is administered by MPI. There are 38 FDMA accredited mediators (of whom three are also tikanga accredited). All are independent practitioners.
MPI reports that there have been 125 requests to mediate under the FDMA to date. The majority have been in Canterbury and Waikato. Most have related to dairy farms. But the number relating to dry stock farms is increasing.
Feedback from lenders and farmers has been positive. For my part, I have mediated c.$250 million worth of farm debt to settlements under the FDMA so far. It has been a privilege. In my experience, everyone works hard to find sustainable solutions. Roadmaps to progress are achieved, with parameters and sensible timeframes. The pressure is usually reduced. Folk leave the day with handshakes and a smile. Essentially, the parties, like Bowie, say “Can’t we give ourselves one more chance?”.
Next month: “Getting the best result from a Farm Debt Mediation.”
- Mark Kelly is a barrister, commercial mediator, and accredited FDMA mediator. He mediates throughout NZ.