ASB has set aside $1 billion for a land optimization program that is expected to contribute up to $4.5 billion to GDP in the next five years.
In a groundbreaking move for New Zealand, ASB’s Every Hectare Matters initiative will provide funding to independent agricultural consultants to develop customized optimization strategies tailored to farmers’ land, objectives, and succession requirements.
The program will offer loans of up to $5 million per customer, along with comprehensive advisory support over a five-year period to help implement their new model. The initiative is particularly focused on opportunities within sheep, beef, and MÄori land.
ASB’s general manager rural, Aidan Gent, described this as a significant shift in rural lending aimed at enhancing the resilience of the primary sector and ensuring the continuity of family-owned farms.
Research conducted by Lincoln University’s Centre of Excellence in Transformative Agribusiness suggests that once fully implemented, this program could potentially increase New Zealand’s GDP by $4.51 billion annually and contribute 5% towards the government’s export growth targets.
Capital access and interest rates will be determined based on projected future returns under the new model, rather than current farm revenue.
To alleviate cash flow constraints, farmers will be able to finance the total cost of their investment, including interest and short-term losses, over a five-year period.
This extended timeframe allows for improvements to begin yielding results, whether through system enhancements, technological investments, or expansion of farm operations.
“We are engaging with farmers who are passionate about their land but face challenges in funding improvements to increase profitability and create sustainable businesses that can be passed down to future generations,” said Mr. Gent.
The Every Hectare Matters initiative was developed following research by Lincoln University in collaboration with ASB earlier this year, highlighting the potential economic benefits of smarter land use and the need for improved access to finance to realize these opportunities.
Landowners with significant optimization potential, including MÄori and sheep and beef farmers, are identified as key beneficiaries of this initiative. Despite owning vast land holdings, these sectors often struggle with cash flow limitations that hinder their ability to invest and maximize returns.
Mr. Gent, who also operates a dairy farm and small beef block, views this initiative as a meaningful step towards addressing industry challenges.
The research from Lincoln University identified three key areas for improvement: capital, advisory services ā including the role of farm consultants and the quality of advice ā and the integration of technology.
After over two years of development, Mr. Gent hopes that other financial institutions will follow suit and launch similar initiatives.
In terms of eligibility criteria, ASB has aimed to keep it straightforward; farmers must have over 50% equity in their property ā a requirement that most sheep and beef properties meet ā and collaborate with consultants and other advisers to create a plan that enhances economic viability without compromising environmental sustainability.
Many farmers struggle with succession planning and optimizing their land in line with their goals, often feeling apprehensive about initiating these discussions. Traditional lending practices may pose challenges in accessing the necessary funds for such initiatives.
Mr. Gent sees this new initiative as a mutually beneficial advancement for the industry and hopes it will catalyze further developments.
sally.rae@odt.co.nz
