13 December 1996

Overdrafts old-hat as farmers switch to fixed rate loans

By Allan Wright

FARMERS are switching from overdrafts to repayment loans, according to Clydesdale Banks senior agricultural manager, David Douglas.

"Ten-year rates look relatively stable, but short-term moves would tend to be upwards. Any rise may take longer than many expect, but the mood is pushing farmers to fixed rate repayment loans rather than extending overdrafts," he told a news conference in Glasgow this week.

"It is something we would encourage because it brings more business discipline to a particular project for which an advance is needed. A sound business should be able to raise 10-year money at less than 10%," he said.

Mr Douglas also advised dairy farmers with no successors, or facing hefty investment bills, to think seriously about selling up.

"We have no general advice on whether or not to sell quota. Each farmer will have to make up his own mind. But for some it will be difficult to turn away from the opportunity to create a large pension fund by selling up now while quota has a value of 60p/litre."

He thought pressure on milk prices rather than political action would drive quota values down.

Scottish agriculture, said Mr Douglas, was in a remarkably healthy state with the livestock sector showing real resilience.

"It would be folly to pretend that the BSE crisis has been anything other than extremely damaging. But Scottish farmers have made the best of this thoroughly bad job by maintaining a commitment to quality stock and by refusing to become negative about their long-term future.

"Partly as a result of the industrys vigorous response, income levels on most livestock units are far better than many predicted would be possible. The year ends on far higher income levels than had been expected."