‘Cheap money’ offer to British farming

Bankers are keen to lend to British agriculture and, with borrowing rates at “historically low levels”, now would be a good time to secure any long-term finance.

According to Barclays agricultural specialist Martin Redfearn, farming has survived the recession pretty well. People were still buying food and, while there had been some trading down, it was mainly the “near to market” end of the food chain that felt the effects, he told this week’s HGCA outlook conference in London.

“I’m not sure that growers of broadacre crops will have noticed the effects of the recession on consumption patterns,” he said. “They’ve been supplying the same amount. It’s just the end uses that have changed.”

The fact that agriculture was still relatively secure was reflected in recent lending figures, which showed that farm borrowing had reached a record £11.32bn in June, 7% more than a year ago. “Clearly the banks are still lending, despite all the media reports.”

Mr Redfearn said this was not just because the bank’s money was secured against the value of land, but because farmers were good at repaying their debt. “We have conservative lenders and conservative borrowers, which makes for a fantastic banking relationship.”

As for the cost of borrowing, that would depend primarily on the supply of money and the demand for it. The Bank of England base rate was fairly irrelevant.

Initially, following the credit crunch, the supply of money had shrunk, while the extra regulatory burden had also raised costs. But, with confidence returning, so banks were more willing to lend to each other and the interbank lending rate had dropped below 1%.

With five-year money now available at between 5% and 6%, farmers should seriously consider locking in if they have long-term investments in mind, Mr Redfearn told Farmers Weekly.

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