ICMSA negotiating reduced interest loans with non-Irish banks

THE Irish Creamery and Milk Suppliers Association (ICMSA) and co-ops are negotiating reduced interest loans with non-Irish banks in the eurozone, the society revealed at its annual conference in Limerick yesterday.

Negotiations with a German commercial bank are at an advanced stage, according to one industry source. ICMSA president Jackie Cahill said Irish farmers are repaying €400 million annual interest payments at 1.5% higher rates than the eurozone average, while some are even paying another 0.5%. He said farmers are no longer capable of supporting that extra cost.

“We trusted the banks for far too long and far too much,” Jackie Cahill told Taoiseach Brian Cowen and other attendees at the conference in the Castletroy Park Hotel yesterday. “Already we see the banks turning against us, their customers; the very people who have rescued them.

“The Government has an obligation to ensure comparable EU interest rates in Ireland and not to allow the banks to rebuild their business on the back of farming, the agri-food business and other businesses.

“Already we see a widening gap in interest rates being charged. This of critical importance to farming. Next to animal feed and fertiliser, interest costs amounting to €400m per annum is the third biggest cost for Irish farming. Already Irish overdraft rates are 1.5% higher than the euro average and other loans are even 0.5% higher than that. Unless the banks are prevented from doing so, these margins will grow over time.”

Mr Cahill said the banks are increasingly attempting to encourage farmers to restructure their loans so that banks can charge them a higher interest rate. He urged farmers to bear in mind that every additional 1% in interest rates charged on the total borrowings currently held by farmers amounts to €50m annually.

“The ICMSA has, in conjunction with co-ops, developed a plan to secure farm finance from non-Irish banks in the eurozone if the margins charged by Irish banks move significantly out of line with other countries.

“The system we are examining would involve farmers ‘pooling’ their borrowings into €10m lots with the help of their co-ops, and financing these ‘borrowing blocks’ in euro from banks operating in other member states.”

Mr Cahill also urged the Taoiseach to intervene with retailers to ensure a fairer deal for food suppliers, for the state to contribute to the estimated €800m capital costs required to meet increased dairy sector targets, and to safeguard the recovery of agriculture in the budget.

In reply, Taoiseach Brian Cowen said the only way for farmers and other businesses to be guaranteed access to future funding would be to ensure that the Irish banking system gets back on a firm footing.

Mr Cowen said the Government has made the “tough decisions necessary to improve the regulatory structures within Irish banking, including the appointment of widely-respected regulator for the industry”.

This has rebuilt Ireland’s financial reputation with its trading partners, he said.