Loans for 500 acres a week approved in Bank of Ireland

Loan approvals for land purchase are running at about 500 acres per week in Bank of Ireland, said managing director Mark Cunningham, during the Joint Oireachtas Committee on Agriculture, Food and the Marine dairy industry discussion with bankers.
Loans for 500 acres a week approved in Bank of Ireland

Mr Cunningham said, “The land purchase market is quite active at present, but the level of gearing on that land purchase tends to be very low.

"We are looking at somewhere in the order of 30% on average across the book in terms of the level of debt that farmers are taking on.

"While there may be concerns that in certain sectors farmers are becoming over-leveraged and over-borrowed, in these instances, the actual level of debt being taken out on land purchase is quite light.”

He said the lending tends to be on a 15-year basis.

Strong lending for land purchase supports banker assurances that the milk price slump is not hitting cash flows yet.

“We expect that will change as we move into 2016 and get into spring production.

"Right now, in 2015, farmers’ cash flow is not too bad,” said Ulster Bank managing director of the commercial banking division, Eddie Cullen, during the Oireachtas Committee discussion.

Ulster Bank senior agricultural manager Ailish Byrne said: “We are asking them to contact us now, particularly if they are spring milk producers and have cows dried off, because they should have time now to prepare cash flow budgets and to know their costs of production, rather than waiting until next spring, when they find themselves under pressure with cows calving and so forth.”

Bank of Ireland head of agriculture Sean Farrell said, “As a general rule of thumb, once one exceeds a debt level of on average €4,000 per cow or 80 cent per litre of production, our experience is that efficiency levels must be high for that to be a sustainable level of debt.

"However, he noted there can be numerous income sources on each farm and different cost bases not impacted by efficiencies.

“For example, rented land plays a significant role and basic payments vary considerably.”

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