UK producers owe Barclays nearly £1.6bn
UK farmers owe £3.50 for every £ of credit, a slight rise on last year, according to latest figures from Barclays.
Speaking at the launch of Barclays Agricultural Banking last week, which combines all the banks services to farmers in a single business, John Page, agricultural director, said lending by the bank was up by 7.9% on last year to almost £1.6bn in September, marking the fourth successive annual increase.
Total lending by all banks (to agriculture, forestry and fishing) topped £8bn, up from £7.6bn last year.
Lending increased mainly in traditional livestock areas like the south-west, the west and Wales, reflecting a 17% fall in prices in this sector over the past 12 months. "In contrast, arable prices have only fallen 1%."
Beef and sheep farmers in the south-west owed £7.50 for every £ in credit, those in the West Midlands about two-thirds of that. In Wales, the ratio 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.
"But the percentage of pig farms needing intensive care stuck at 11% for the second year running, with over half taking remedial action," said Mr Page.
Nevertheless, lending to farmers is four times less risky than to business in general. Gwilym Francis, regional agriculture manager for Lloyds TSB, told producers attending a recent MDC-sponsored seminar, at Gelli Aur College in Carmarthenshire.
But bankers were concerned about high costs in the tenanted sector.
That said, he warned that belt tightening, reduced reinvestment, tax refunds and cashing in assets like Dairy Crest shares were keeping some dairy farmers in business, but this was not sustainable.
Mr Francis forecast that there would be 3000 milk producers in Wales by 2002 compared with 5000 on vesting day in 1995.
Whether they had problems or not, he urged farmers to talk to their bank managers more.
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. 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." *
(ratio of debt to credit)
1999 1998 1997
UK farming 3.5 3.0 3.0
Arable farming 3.6 2.7 3.4
Mixed farming 4.1 3.8 3.7
Beef and sheep 3.3 3.5 2.9
Dairy 7.1 6.7 5.2
Pigs 12.7 8.6 3.8
Source: Barclays Agricultural Banking