Farmers are an ‘acceptable’ risk for banks
We’d enjoyed a delicious plate of steak and chips at a local hostelry. I’m not sure why we were invited. Perhaps the land agents hosting us knew we were in need of a decent meal. Then over coffee we listened to the wisdom of a top agricultural banker.
Earlier he’d heard some of us whingeing about the harvest we’d just gathered and the deductions from agreed prices being imposed by merchants because of poor quality grain. We’d been almost as scathing about the difficulties of getting rape and wheat crops drilled and established, what with the continuing wet weather and slugs.
“It’s time to forget all that,” said the banker. “You’re about to experience the best time of your farming lives. And ignore the so-called reluctance of banks to lend. That doesn’t apply to you lot.”
That wasn’t quite what he said but it was what he meant. His job was to “sell” money, after all, and he clearly believed those around the table represented acceptable risks for his shareholders.
Indeed, his bank is not the only one going out of its way to attract more farming business. The rising value of land as collateral against loans helps, of course, but there’s also a widely held belief that farm profitability is about to increase on the back of world shortages. Let us hope the bankers are right because margins have been pretty thin for some of us in recent years.
Furthermore, the speaker continued, the potential to increase farming’s share of consumer spend on food is huge. He showed a graph that tracked UK expenditure on food and booze since 1990. It had increased in each of the 20 years shown, rising in the process from about £60bn to almost £140bn. Meanwhile the farmgate value of the same goods had bumbled along from a starting point of £18bn to reach barely £20bn by the end of the 20-year period. And he challenged us to grab a bigger slice of that market.
“The rising value of land as collateral against loans helps, of course, but there’s also a widely held belief that farm profitability is about to increase on the back of world shortages. Let us hope the bankers are right because margins have been pretty thin for some of us in recent years.”
A few days previously, I had spent a fascinating day at the annual Institute of Grocery Distribution (IGD) Convention in London. As always the hall was full of upwardly mobile young executives from virtually all the food companies in the UK. And the impressive speakers were, almost without exception, the head honchos of the biggest of those companies.
Most spoke of the obvious need to retain the trust of their customers, but also their suppliers. Some even suggested there was a need in these cash-strapped times for more co-operation. Those bits were for the media and the birds, I suspect, because farmers who supply supermarkets have occasional problems of trust with their buyers and we all know there’s a battle to the death out there on the high street as retailers ruthlessly compete for market share.
But the most enlightening aspects of the platform presentations was when the speakers described the lengths they went to to find out what their customers wanted and to deliver it for them. Devices such as loyalty cards and online ordering enable retailers to computer-analyse the likes and dislikes of every one of their regular customers and respond accordingly. The big catchphrase was “personalised service” for every customer.
As I sat there, I remembered reading an estimate that less than 50% of farmers were concerned about where their produce ended up once it left the farm. Maybe that’s the reason our share of the consumers’ spend has remained flat.
David Richardson farms about 400ha (1,000 acres) of arable land near Norwich in Norfolk in partnership with his wife, Lorna. His son, Rob, is farm manager.
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