24 July 1998

SW is most vulnerable

FARMERS in the south west are among the most financially vulnerable in the country, says John Page, agriculture boss at Barclays.

The regions liquidity ratio – the ratio of borrowing to credit – was the countrys highest at 5, he told a conference in Yeovil last week. And the index, which provides a guide to financial health (the lower, generally, the better) was over 20 for hill beef and sheep units.

Many dairy businesses were also in a "worrying" position, said Mr Page. "The milk price went up after vesting, but so did costs. Everybody paid more for everything and nobody was better off."

The banks lending to milk producers in the region had risen by more than 25% to £52m in the 18 months to June. But the outlook was slightly brighter, with 1999 marking the first year of improvement in fortunes. "A slow, but necessary, recovery, will begin," said Mr Page.

A weakening of sterling and a tighter world supply and demand pattern for meat and grain would contribute, taking UK farm income to £1900m after this years low-point of £1700m. This compares with the £4000m-plus in 1995.

Borrowing could continue to rise, said Mr Page, because of the "lag" effect – particularly if the cereal harvest proves disappointing.

Farmers in the south west were borrowing £175m from Barclays at June 1998, up £36m on 18 months earlier. "But at the same time, farmers credit balances have not fallen as much as some people think." &#42