New Zealand dairy farm debt

Abstract

New Zealand dairy farmers have long enjoyed worldwide recognition for their dairy farm systems, farm profitability, responsiveness to change and wealth creation from farming. The world economy and local conditions are changing and New Zealand farmers face new challenges. Dairy debt in New Zealand is rising and this has many implications. The rapid expansion in dairy has largely been debt funded, to the extent that dairy farming comprises 64% of agricultural debt in NZ. Debt funding is an essential part of modern dairy farming. Prudent borrowing can be highly profitable and wealth creating. However there are negative aspects to debt financing that have consequences for liquidity, solvency and profitability.