Farm borrowing has increased again, to a record £9.5bn by the end of March, according to the latest Bank of England figures.

It is the sixth quarterly rise in a row, reflecting the cash flow problems caused by delays to the single farm payment and low commodity prices, said Euryn Jones, agriculture policy director at Barclays.

The headline £9.5bn represents an 11% rise since the same period in 2005, and 23% in the arable sector, but comes in below some forecasts.

“The increase in borrowing due to the single payment has masked other fundamentals.

If payments are going to start coming through, farmers will have to think about their borrowing position.”

A significant number had borrowed in part to offset trading losses, he said, and would need to take a serious look at the business once the SFP arrived.

Some bigger cheques were now arriving, he added, and the evidence was that the money was going to reduce debt.

“Looking at the balance sheet of UK agriculture in terms of assets and liabilities, the most significant feature is still the strength of it.

For every £1 borrowed in the sector, it has assets worth 10 times that.”

John Barker at HSBC agreed that there were underlying profitability issues, but said farmers had not been using the extra lending to cover other debts.

“The issue of profitability is a challenging one, and farmers will be refocusing their management time on the longer-term issues.”

Single Farm Payment Scheme special report from FWi