#opinion the truth about cows & their billions

Lets get a reality check over the numbers swirling around Fonterra – first of all are they good? Honestly? anything with Billions in it right about now makes you feel like “finally we are getting somewhere” – the truth is we aren’t. Total farm debt currently stands at around $60 Billion whereas Dairy Farm debt alone was around $35 Billion at the end of Match 2025. In 2019 something called the “Farm Debt Mediation Scheme” came about which basically underwrites farmers through things such as interest free loans. So, for the last more than five years taxpayers have been subsidising farmers in the many billions. In November of 2023 the amount of Dairy debt shifting to interest only went from $17.4 Billion to $20.2 billion.  The Debt-to-Asset Ratio is not great at all. This ratio is a preferred indicator of financial health, as it shows the proportion of assets financed by debt. Around 8% of farms have debt-to-asset ratios over 90%. Trust me; that is not good. Now; higher farm input costs and increased interest rates weighed on farm profitability. Some farmers used credit facilities to manage cash flow – in other words if you look at the books you’ll find a very New Zealand story of “keeping up with the jones” – in other words living off credit to keep your heads above water while keeping up with appearances. A July 2025 survey by Federated Farmers found that 41% of farmers planned to reduce their debt in the next year, indicating a strong focus on financial prudence. What does that mean? Instead of rushing out to buy a swag of new equipment 41% will pay down what they have already ticked up – this is not going to create economic stimulus – in fact a large portion will go to the banks and some will go to local businesses; themselves taking on debt in the hope that the increased cash for farmers will eventually come – so we have a good amount of debt being repaid. A couple of farmers buying machinery does no longer an economic windfall create.

Now, take the windfall in the Dairy sector – Fonterra will be dishing out a farmer dividend with around $16 billion or up 30% this year. There will be another $3.2 billion from the sale of one of its brands so close to $20 billion will drop – if all that money was used to retire debt then for Dairy farmers alone roughly $15 billion would still be owed. This is where we move into the territory of “robbing Peter to pay Paul” – in other words the new terms of managing cashflow. It’s a fools game as the peaks get higher and the troughs longer and more prolonged. There were approximately 755 Māori-owned dairy farms in New Zealand, according to Stats NZ data from August 2023, out of a total of around 10,400 dairy herds in the country. The farm size, on average is larger – My uncle was a Dairy farmer, my brother and cousins all knew how to milk and just after 6am id be out in the shed hosing down before getting the school ferry to the mainland for my course, home in time to spray out the shed after the evening milking.

So when you hear the big numbers – they are big but the problem is deep – the debt is deep and what we have to decide is that as the troughs get deep and wider – how much longer can we afford to subsidise Farming?

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