The selling of bank debt to vulture funds may be one of the factors behind a significant increase in the percentage of farmers saying their farm debt is too high, in the 2018 Irish Examiner/ICMSA Farming opinion poll.
Farmers have been hearing more and more about banks selling loans to vulture funds, whether they are banks leaving the Irish credit market, or banks reducing their loan books.
Farmers worried by such reports are probably among the 34% in the poll who strongly or slightly agree that “My level of farm debt is too high.”
That result compares with only 24% in 2016 and 21% in 2017. It is also significant that in the poll of 524 farmers, it was those aged 35-44, or dairy farmers, or farmers with larger holdings are more worried, with 46% agreeing their farm debt is too high. They are the farmer categories more likely to be ambitiously prepared to finance expansion with borrowings, rather than older or younger farmers.
Only 36% of farmers under 34 or aged 45 to 54, and 28% aged over 55, indicated farm debt is too high. Only one in three tillage or livestock farmers thought so, compared to 38% of dairy farmers.
Worries over high debt ranged from 28% under 40 acres to 37% over 120 acres in the poll.
While 46% disagreed with the statement, “My level of farm debt is too high”, that figure is down from 61% in 2017, 56% in 2017, and 62% in 2017.
Therefore, the overall findings point to a continuing, traditional fear of indebtedness among Irish farmers, perhaps fuelled now by high-profile but isolated cases of farms being sold to clear debts, sometimes on the orders of the new vulture fund owners of the debt.
The other factor which may be at work is rising indebtedness in 2018, after farmers borrowed to get through the difficult spring and the following drought.
At the end of 2017, total outstanding borrowings by farmers had declined steadily to €3,504 million, from €6,412 million in September, 2008, according to Central Bank figures.
Even in the past few weeks, bankers confirmed this trend, with Sean Farrell of Bank of Ireland recently saying most farmers are very lowly geared (indebted relative to assets).
He said: “They have fairly low levels of borrowing. Many of them have no debt levels at all.Over the past couple of years, debt levels per unit of increased milk output have fallen in Ireland because of profitability, funding expansion from cash flow, and the fact that we are lowly borrowed by comparison with the Netherlands, Denmark or New Zealand.”
Tadhg Buckley of AIB said: “About one third of dairy farms may have only very little working capital facilities. Our heaviest indebted dairy farms would still only be at what the average debt levels are in New Zealand and would still be below the levels in Denmark and Holland.
“While there are some farmers with a lot of debt, those farmers are mainly quite well structured in terms of long-term facilities, often 15 or 20 year facilities, to allow them to reduce the repayment burden on their business to allow them to trade.
“Farmers who have expanded are under a lot of pressure this year, but we have seen that in many cases expansion has helped them improve their overall efficiency from where they were in 2014, for example, when they worked under quota restrictions.”