Farm borrowings reached £11.3bn in the second quarter of 2009, according to new figures from the Bank of England.
Total lending to agriculture, hunting and forestry grew by about £400m in the three months to July, up from £10.9bn in the first quarter of the year as the higher cost of farm inputs strained farm accounts.
Lending has increased nearly 7% on the same time last year. At the same time, farmers banked less cash with deposits falling £300m to £4.6bn, the Bank’s figures reveal.
Barclays’ agriculture specialist Martin Redfearn said that despite the continued rise, the rate of increase had slowed compared with the first three months of 2009. “Agricultural lending is strongly influenced by arable farmers, who, during the first three-quarters of the year, tend to be spending on crop inputs, labour and fuel in the build-up to harvest.”
NFU economist James Edwards said agriculture was bucking the trend seen in the wider economy where lending to other sectors of industry had slowed. “It’s still an attractive sector for lenders and prospects for some sectors are good. Plus, British agriculture tends to borrow mostly from national UK banks, and they haven’t reduced lending as much as some foreign banks,” he said.
But the tightening of credit was visible further up the food chain, he added. “Lending to food processors and manufacturers is down 26% in 2009.”
NatWest head of agricultural servcies Jimmy McLean said the figures showed farmers had continued to invest. “The rise year on year in borrowing is about 6.5%. And although new tractor sales have slowed in the last quarter, there has been significant investment over the last year and that cash has had to come from somewhere.”