Many farmers are taking advantage of strong returns for meat and milk to pay down debt, the latest Federated Farmers Banking Survey and Reserve Bank of New Zealand data shows.

Reserve Bank data shows total agricultural lending dropped $1.4 billion to $61.2 billion in the year to April 2026.

“Strong dairy payouts, including a capital redistribution of $2 per share to Fonterra suppliers, combined with record beef and sheep farmgate prices, have likely allowed farmers to meaningfully reduce loan principal,” Federated Farmers banking spokesperson Mark Hooper said.

Responses from nearly 540 farmers to the banking survey in May also showed falling farm mortgages and improved farmer-banker relationships.

In the survey, the number of respondents with mortgages under $2 million has risen to 41 percent, up from 38 percent six months earlier.

Average mortgages for sharemilkers and for dairy and meat and wool farms all fell significantly between the November 2025 and May 2026 surveys.

“The outlier is arable farms,” Hooper says.

“That sector is in near-crisis mode, with weak grain prices, rising costs, tough growing conditions and competition from lower cost imports.

“The arable farm median mortgage of $3.5 million is the highest of all farm types.”

Other key survey results tracking the farmer-banker relationship continue an upward trend.

Farmer satisfaction with banks reached 69 percent in May, the highest rate recorded in the last eight years of the twice-a-year surveys.

The survey shows banks have lifted their game on the communication front.

Farmer satisfaction with their bank’s communication is at 69 percent, up from 61 percent in the November survey.

The number of farmers who said they were feeling undue pressure from their bank came in at 10 percent, the lowest since 2018.

The average mortgage rate was 5.49 percent, down from 5.78 percent in the November survey, and two out of five respondents to the May survey have over 75 percent of their loans on floating rates.

“One finding that all banks should ponder: the single most consistent theme across more than 200 general comments added by farmers was that a knowledgeable, available bank manager outweighs factors such as loan rate competitiveness,” Hooper said.

“Where communication from banks works, it tends to reflect a specific person rather than the bank system.

“Where it fails, the cause is usually the same.

“One farmer’s comment states it plainly: ‘Never hear from our bank; don’t even know who our rural bank manager is. That’s concerning and disappointing if we need them’.”