Our Insights

The future of Agricultural finance. it’s all about rogue bees!

Jul 31, 2020 4:44:58 PM / by Scott Wishart

Scott wishartScott Wishart, Managing Director, NZAB

I came across this the other day:

A company pursuing only profit but not considering the impact of its profit seeking upon customer satisfaction, trust or long-term resilience, could do very well in the short term, but its long term future may be perilous. There is a parallel in the behaviour of bees, which do not make the most of the system they have evolved to collect nectar and pollen. Although they have an efficient way of communicating about the direction of reliable food sources, the waggle dance, a significant proportion of the hive seems to ignore it altogether and journeys off at random. In the short term, the hive would be better off all bees slavishly followed the waggle dance, and for a time this random behaviour baffled scientists, who wondered why 20 million years of bee evolution had not enforced a greater level of behavioural compliance


. However, what they discovered was fascinating: without these rogue bees, the hive would get stuck in what complexity theorists call ‘a local maximum'; they would be so efficient at collecting food from known sources that, once these existing sources of food dried up, they wouldn’t know where to go next and the hive would starve to death. So the rogues bees are, in a sense, the hive’s research and development function, and their efficiency pays off handsomely when they discover a fresh source of food. It is precisely because they do not concentrate exclusively on short-term efficiency that bees have survived so many million years. If you optimise something in one direction, you may be creating a weakness somewhere else.” (source Rory Sutherland)


When I first read it I thought this sounds like banks! But after reflecting, its actually all of us in the agricultural sector. For as long as rural banking has been around, we’ve all been stuck in a ‘local maximum’. We became incredibly efficient at going to the banks and getting funding for whatever we required. That food source is now drying up, and we haven’t been sending out enough ‘rouge bees’…

So, what should the rogue bees be looking for? What does the future of agricultural finance look like?

The future of farm finance (bigger)



  • The length of the loan will match the asset being funded

The longest you can get a term loan for at the moment on your farm is on average about 3yrs.   Which is crazy really when your intent when purchasing is decades It makes no sense to re-apply for your loan every couple of years, when you’ve clearly articulated your intent to own the farm for a long time.

Conversely, why would you add finance for a tractor to your interest only loan? You’ve got to pay that off to ensure you have the ability to buy the next one.

Loans of the future will focus on specific assets and have terms and repayment structures to match the underlying assets, not the short-term strategies of the funder. Imagine a funding structure with a 30 year interest only for your land and then amortising things like infrastructure and plant?

  • Having different assets funded with different financiers will no longer be a sign of weakness, it will be a sign of strength.

Over the years we have come to view the use of non-bank finance as something that you only do if the bank doesn’t come to the party. But that will change. There’s a lot of innovation happening in the finance space, and newcomers with a specific strategy to focus on niche parts of the industry will ultimately do a better job of understanding needs and funding them than a generalist funder. They will also do a better job of understanding the real risk associated with these loans, and so won’t be overly expensive.

  • Finance will be automated, but not at the expense of people.

Ag tech innovation is everywhere. Finance for simple items will become automatic. There will be tools that will link on farm decisions to finance in a much more streamlined manner. Things like buying stock will trigger the finance required and selling stock the repayment. The ability to present a plan to these systems will be the key skill set of the future banker or advisor.    

  • Finance will focus on farmer need, not financier need.

Financiers will be increasingly interested in farmer strategy and developing innovative products to serve those needs. They will be nimble and proactive and reliable. We will see an active desire to understand and solve problems for farmers and create solutions that unlock potential in their businesses.

  • It is not just about the numbers anymore.

It is becoming increasingly important that lenders understand the environmental and social impacts of their lending decisions. We are also seeing more and more that investors are looking for ‘green’ investments and that they are happy to accept a lower return when they are investing in genuine world class businesses. That creates a huge opportunity for NZ Agriculture to demonstrate our skill in this area and attract cheaper funding on the back of it.

  • Farmers will be rewarded for their performance and ability to execute on strategy

More than ever it will be critical that farmers own and understand their strategy, performance, and funding requirements. Those that can, will be able to access endless finance opportunities on terms and conditions that work for them. You will need a highly skilled team around you that ensures you navigate this in order to get what you deserve.

  • Finance will be harder to get and maintain for serial poor performers

Farming is a biological system, and we all get that things can change, but finance of the future will be able to look through these uncontrollable events and determine how well you as a farmer have responded to change and challenge. The flip side of the best performers getting better deals is that the worst performers will be worse off.

  • The main trading banks will still be the cornerstone of our finance industry

While it might sound like the future of finance isn’t with the banks, that couldn’t be further from the truth. The future for the banks is one where they have a really clear handle on the risks they fund, along with loan products and terms to match. We will see some really positive changes that come out of the banking sector as innovation drives competition.


So, get ready. Change is coming, and it will create real opportunities for those businesses who deserve it. The question then becomes…do you?

Tags: Debt, Action, Planning, Budget, Banking, Strategy

Scott Wishart

Written by Scott Wishart

Managing Director and Co-Founder of NZAB