Credit crunch starts to bite on farms

More farmers reckon the credit crunch is affecting their businesses, according to a new survey from the NFU.

One in four farmer members say they are now at “significant risk” and likely to be affected by the current economic climate – compared tojust one in six farmers in December last year.

However, the four major high street banks maintain they are continuing to lend to farmers and are taking on new business, while other banks appear to be lending less, said the NFU.

The survey found that 36% of farmers questioned had approached a lender for a business overdraft, with almost 80% taking what was offered.

The NFU said the results revealed that many farmers had underestimated how significant credit problems would affect their businessed in 2008 and and were finding ledning terms more difficult in 2009.

However, overdraft rates were typically less than 5%, the NFU said.

NFU economist James Edwards said: “The banking sector is still taking a relatively favourable line in terms of the availability of lending to farmers, although it is clear that there has been a shift in both the rates and terms offered to farmers.

“However, what the results also show is a risk of complacency, with more producers now indicating credit is a bigger risk to their businesses, especially tenant farmers. With major capital costs looming to meet new environmental and animal welfare rules, there is every risk that credit could be a major issue for many producers.

The NFU will continue to keep a watchful eye on the credit conditions and seek to ensure that lending continues through the year,” he said.