Credit squeeze getting worse as pressure intensifies

The wider banking crisis and the plight of homeowners unable to meet their mortgage repayments is rightly a matter of much discussion in the media. It tends to mask, however, the difficulties caused by a general credit squeeze on business and farming.

The main banks have been quick to argue that they have ring-fenced hundreds of millions for farm loan consolidation, farm development and land purchase. This is true, but the funding tends to be more readily accessed by a small cohort of the most progressive or financially strong farmers. In any event, the credit squeeze is not all about banks; it is also linked to the relationship between farmers and their other traditional creditors, such as merchants who supply them with feed, fertiliser and hardware, and co-ops.

The problem has been exacerbated this year by the huge additional expense incurred by farmers in dealing with the aftermath of an exceptionally wet 2012 and the resulting fodder crisis. Farmers have spent thousands extra on additional feed and it is this expenditure that is now causing problems.

In ICSA we are getting increased reports of farmers coming under immense pressure to sort out bills for meal and fertiliser. For many suckler farmers, selling weanlings from now on will bring temporary relief, but in many cases the receipts from the early and best weanlings will not come near to paying all the bills.

The minister needs to ensure that the Disadvantaged Area payment is paid as soon as possible and that all outstanding suckler welfare payments are made quickly. We also understand that there will be an advance payment of the Single Payment in October which is set to be a permanent feature of CAP. This will help cash flow.

However, there is an emerging problem with many farmers getting letters from the department in recent weeks suggesting that the area on which they are claiming their Single Payment is inaccurate. They are facing hundreds and, in many instances, thousands of euros of retrospective fines if they accept the department’s accusatory letter. If they appeal — which many will do — then they are faced with the prospect of having their payments held up, perhaps until 2014 in some cases.

This is an outrageous assault on farmers who in most cases have relied on professional advisors to ensure that their applications were correct over the years. It is essential that the minister gets involved to sort out this morass. In the short term it cannot but have serious consequences for cash flow.

Even farmers who have no headaches with their direct payments, are faced with trying to sort out their debts with various creditors.

It is now urgent that merchants and co-ops sit down with farmers who have difficulties and work out a plan to clear up debts over a phased period. ICSA would appeal to these businesses to continue to supply farmers with meal and fertiliser where the farmer is making a real effort to pay down debts.

We would urge that farmers in difficulty contact their banks and we would also call on banks to ensure that farmers are given a fair hearing. It is essential that credit applications are processed as quickly as possible and in general, decisions on credit should be in the hands of the local bank branch.