3 July 1998

Farm borrowing on rise in short term, Scots are warned

By Mike Stones

WORRY but not concern about rising farm borrowings in Scotland was voiced by the Royal Bank of Scotland at last weeks Royal Highland Show.

Speaking at the event on Thursday, the banks agricultural manager Jimmy McLean renewed warnings (News, June 12) that borrowings in the first quarter were 16% higher than last year. "Theres no doubt this is one of the most difficult of times, with the depression extending beyond farmers to include other areas of the rural community such as machinery dealers and other aspects of the agricultural supply trade," he said.

"There are only two sides (to the balance sheet). If output is down, producers must cut costs," he said. Falling machinery sales suggest producers are already trying to trim fixed costs.

In the short term, lifting the export ban on British beef would provide a moral but not a financial boost. "The strength of sterling would mean that the lifting of the ban would have only a slight practical impact."

Little weakening of sterling relative to the DM is forecast by the Royal Bank of Scotland. A rate of 2.80DM to the £ is forecast for the end of this year and 2.70 DM by the end of next year.

Mr McLean was more optimistic for the longer term prospects for Scottish agriculture. "Scottish farming is made up of relatively small and nimble businesses which are able to adapt to market opportunities," he said.

&#8226 UK farm borrowings as a whole have increased by 12% in the past two years, and are set to climb by as much again in 1998, says Tim Aspell of Leicester-based accountants Pannell Kerr Forster.

Lower produce prices, area aid cuts, falling compensation levels and higher interest costs are the main causes, he points out.

Farmers should consider crop type and variety, prepare detailed cost budgets, delay machinery purchases and review selling procedures to try and balance the books, he adds.