Finances untainted by BSE aftermath – Barclays Bank

21 February 1997

Finances untainted by BSE aftermath – Barclays Bank

LOOK at the figures and the BSE crisis never happened, says Barclays Bank head of agriculture, John Page.

His comment follows analysis of the financial health of farmers over the past year using the liquidity ratio – the proportion of money borrowed on loans and overdrafts to cash held in current and deposit accounts.

Overall the agricultural index fell from 2.2 to 1.9 (a lower figure suggests healthier finances).

And on mixed beef and sheep farms the year-end index of 2.25 was slightly lower than 12 months before. "Lamb prices up 10% to 20% on 1995, BSE compensation and good housekeeping were the reasons," says Mr Page.

But most marked was the improvement in the pig and poultry sector. In Sept 1995, they were borrowing four times as much as bank reserves; by late the following year, this had come down to just twice the amount.

High costs of land, stock, buildings and quota continued to keep dairy farmers the most heavily in debt. Their peak borrowing requirement came in July, when barreners were stuck on farms and calf prices were low.

The arable sectors index was 1.5 at both the beginning and end of the period. Despite buoyant cereal and potato returns in the first half of the year, land purchases and price inflation took their toll. (Barclays figures show, for example, the average deal price of a 4WD 40HP-plus tractor at £32,000 in 1996, nearly double the level of seven years earlier.)

The coming months will see liquidity squeezed in all sectors if the strong £ sterling, high costs and low prices continue, predicts Mr Page.

"Import costs may not fall, with the benefit of the currency movements not being passed on to farmers," he suggests. And other factors than exchange rates are involved. "In the case of fertilisers, production in the former Soviet Union, for example.

"But farmers are well placed to face the tougher times ahead, thanks to a robust financial position and a favourable industry structure." &#42

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