Bankers indicated last week that pig farmers may be the most stretched sector financially, and that cattle finishers are considering selling feed rather than buying cattle.
But bankers have not seen significantly increasing debt problems among their livestock customers, despite 2018 weather challenges.
Managers from Bank of Ireland, Allied Irish Bank, Ulster Bank, and the Strategic Banking Corporation of Ireland updated the Joint Oireachtas Committee on Agriculture, Food and the Marine on how they are assisting farmers impacted by fodder and drought difficulties.
Seán Farrell said Bank of Ireland has yet to see significant increases in demand for working capital from farming customers.
While there have been some increases in overdraft utilisation levels during July and August, less than 20% of approved limits are currently in use.
We understand that much of this cost has been financed initially by means of co-operative and merchant credit, and we believe that for some farmers it may not make sense, or be possible, to repay all the extra costs incurred in this year in their current working capital cycle, and that they may need to spread these increased costs over several years
He said Bank of Ireland has responded with a €100 million “Agriflex” fodder support fund with extended repayment terms of up to three years, and discounted interest rate of 3.86%.
“It is somewhat unusual that we are seeing commercial farmers being impacted to a greater extent.”
He said they were typically dairy farmers, but in some cases arable farmers who have been heavily affected by drought.
“As such farmers have invested, they will need significant support. They have been making strategic plans and, in many cases, recognising that they have problems coming down the tracks in addition to the problems they are facing right now. They are making plans to deal with those future problems.”
Dr Ailish Byrne said Ulster Bank has experienced a modest increase in demand for working capital. She also noted the credit support offered by some co-ops, and that the farming sector entered 2018 with relatively strong cash balances.
She said Ulster Bank is processing a larger number of small loan applications in 2018 than it did in 2017.
Tadhg Buckley of AIB said: “The pig sector is probably one of the worst affected sectors, even though it does not have a fodder requirement, but it has been indirectly impacted by the increase in feed prices.”
Dr Ailish Byrne noted that there has been a 43% drop in pig farmers’ financial margin in the last 12 months.
She said they received requests from cattle farmers over the past couple of months to extend for three to six months stocking loans that were due to be repaid in the early months of the summer, because animals did not thrive as expected, in adverse weather conditions.
“We have supported farmers with an extension to those stocking loans.”
She said beef finishers are coming to Ulster Bank seeking approval, which they are getting. “However, there is a lot more discussion with us this year compared to other years. They are looking at a viable market for their feed this year, compared to other years. We all know the margins for beef finishers are very tight, and that there is a market out there for their feed, in particular from dairy farmers. As such, they are asking themselves whether they will finish animals this year.