Farmers owe banks more than 8bn
17 December 1999
Farmers owe banks more than £8bn
By FWi staff
BRITISH farmers are in debt by more than £8 billion, according to Bank of England figures estimating the borrowings of agriculture, forestry and fishing.
The figure, which illustrates the difficult times in which many producers find themselves, marks an increase in lending which has risen from £7.6bn in 1998.
Barclays Bank estimates that its farmer clients owe £3.50 for every pound of credit – a slight increase on last year, according to Barclays latest statistics.
Lending by the bank is up 7.9% on 1998 to almost £1.6bn in September, marking the fourth successive annual increase in borrowing.
Borrowings increased in traditional livestock areas like the south-west, the west and Wales, reflecting a 17% fall in farm-gate prices over the past 12 months.
Beef and sheep farmers in the south-west owed £7.50 for every pound in credit and those in the West Midlands about two-thirds of that.
In Wales, the ratio of borrowings to credit dropped to 3.9:1, compared with a national average for the sector of 3.3:1.
The number of dairy farming businesses requiring “intensive care” increased by 50%, the highest rate of increase in any sector.
“In contrast, arable prices have only fallen 1%,” said John Page, Barclays agricultural director.
“But the percentage of pig farms needing intensive care stuck at 11% for the second year running, with over half taking remedial action.”
Nevertheless, lending to farmers is four times less risky than to business in general, said Gwilym Francis, regional agriculture manager for Lloyds TSB.
Bankers are concerned about high costs in the tenanted sector although belt-tightening, reduced reinvestment, and is not sustainable, he added.
Mr Francis forecast that there would be only 3000 milk producers left in Wales by 2002, compared with 5000 in 1995.
He urged farmers to talk to their bank managers more, saying that lenders doors were open to those that were above average in terms of technical efficiency.
“We need up-to-date accounts and forward projections of cash flows and profit budgets,” he said.
“We must be sure you know what it costs to produce a litre of milk and have the technical expertise to make a profit at the market price.”
- Finnie upsets farmers with debt comments, FWi, 19 August, 1999
- Recovery predicted – but borrowings will rise, FWi, 19 february, 1999
- Farmers forced into hock with their bankers, FWi, 27 July, 1998
- Farm borrowings on the increase, FWi, 30 Apirl, 1998