Developments in the agricultural sector

Bruce Lu
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Bruce Lu: Reserve Bank of New Zealand, http://www.rbnz.govt.nz

Reserve Bank of New Zealand Bulletin, 2023, vol. 86., No No.7, 6 pages

Abstract: An article from the November 2023 Financial Stability Report. The agricultural sector is facing difficult economic conditions, owing to falls in dairy and meat prices, elevated operating expenses, and increased debt servicing costs. The agricultural sector represents 11% of aggregate bank lending. Within agricultural lending, dairy takes the predominant share (around 60%), with beef and sheep as the second-largest category (25%). In the dairy sector, loan defaults remain low but are expected to increase. This could accelerate if there is a prolonged period of low prices. In the longer term, the agricultural sector faces climate-related challenges. We are working with banks to improve their capability in assessing climate risks, through stress testing their agricultural portfolio against shocks including droughts and emissions pricing.

Date: 2023
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