A study by the NFU has revealed the UK’s poultry producers pay the highest interest rates of all in the agricultural sector due to the volatility currently being experienced.
Influences on borrowing rates were identified as investments in new equipment to meet EU directives such as the broiler welfare directive and the conventional cage-ban, the dramatic jump in cereals prices since 2010, the oversupply of free-range eggs in the UK and Germany moving back into full production after converting to colony cages early.
“These factors have dampened profitability in the short term and led to a sharp reduction in new projects being approved,” said the NFU banking survey on borrowing. “Although significant, these business factors are not the only ones causing the relatively high interest rates in poultry.
“Due to the scale of investment over the past three years, it is likely that many producers opted for fixed-term loans. Producers were keen to take advantage of base rate tracking at 0.5% and probably locked into fixed rates at a premium.”
In the survey of farms, using 2009-10 figures, poultry farmers’ average interest rates were 4.9%, compared with 3.175% for all other sectors of agriculture. The greatest difference was between poultry and lowland grazing, which paid an average interest rate of just 2.8%.
The bad news of higher interest rates for poultry producers can be somewhat offset by an announcement from Lloyds TSB Agriculture, which is ofering a 0.8% discount on loans to the sector. To qualify for the reduced rate, loans must be above £25,500 and up to a maximum of £11m, with no project costing more that £25m in total.
In a statement, Lloyds said the offer was being made because the bank had access to money from the European Investment Bank, which holds funds for small and medium business to invest. “Some egg producers still need to invest in new laying systems if they are to comply with the rules that come into force in 2012 and continue in production, while broiler producers are investing in new facilities that use feed and energy more efficiently,” said agriculture director Gareth Oakley.