27 July 1998
Farmers forced into hock with their bankers
FARMERS are being forced to borrow large amounts of money to stay in business as farm profits continue to slide, the major banks report.
The Bank of Englands Monetary Policy Committee noted the rise in farm borrowings, according to the recently-published minutes of its June meeting.
The meetings minutes said there were “severe problems” in the sector because of the strength of Sterling. It added: “Much borrowing has been in response to a worsening financial situation.”
A Lloyds Bank spokesman, quoted in the Financial Times, said lending to farmers had risen more than 8% in the year to April. This was double the rate of increase for the banks entire business portfolio.
Farm incomes fell by nearly 50% in real terms last year. A further cut is expected this year with a poor harvest forecast and miserable commodity prices.
But bankers are not worried by the increased lending: They say that the majority of farms are in good financial shape.
Norman Coward, head of agriculture at Midland Bank, said the ratio between loans to farmers and deposits from farmers was no worse than it was in 1992, the last time the industry faced a crisis. That view was also shared by other bankers.
- Financial Times 27/07/98 page 8