FNB not overly concerned about the effect of the drought

In contrast to statements from agricultural interest groups and unions about the effect of the drought‚ First National Bank (FNB) on Monday said it “remains optimistic about the financial well-being of its farming clients”.

This‚ the bank said‚ was because “the true severity of the current drought will only be realised in the coming year”.

For now it appeared that FNB was expecting the recent rains to allow Mpumalanga maize producers who had already completed 75 to 80% of the planting to finish the job soon‚ and farmers in the North West and Free State “still have time to plant”.

Good rains within the next month‚ “with follow-up rain later during the production cycle”‚ could see farmers harvesting “a reasonable crop”‚ the bank said.

“However‚ if dry conditions persist‚ the outlook for an average to good crop will undoubtedly deteriorate. FNB continuously consults with various industry experts to get an indication of possible changes in weather patterns and planting conditions in order to proactively assist clients‚” said FNB Business Agriculture’s Dawie Maree.

The bank said it is “not overly concerned about a substantial increase in farmers who may not be able to meet commitments”.

“Our book is very healthy‚ well diversified and many farmers have the ability to increase gearing levels slightly. This will enable the bank to review individual needs on merit with the view to possibly restructure or refinance facilities of farmers in need‚” said Maree

He said the impact will be much wider than just the agricultural sector‚ as evidenced by the South African Reserve Bank’s increase in the repo-rate by 25 basis points last week‚ “partly on the back of increased food price inflation expectations‚ a direct result of the drought conditions”.