Going back to the ‘Big Two’ in banking is not good news

For some time now it has been possible to identify a distinct pattern in our farming and broader agri-food sector: The reputation of our food and farmers, and the dynamism of our food companies’ exporting capacity is being hampered by an inability to get our domestic policy ‘ducks’ in a row.

To a degree, doing this is effectively beyond our domestic policy capacity. A perfect example of this is the decision of Rabobank and Danske to pull the retail banking plug on ACC and National Irish Banks respectively, with the implications for farm loans and credit that must inevitably follow.

The decision to effectively close these banks has been made by overseas financial owners and is being made on an absolutely clear business basis. The problem ICMSA has is that it means the number of banks whom farmers can approach for the credit necessary to, for instance, expand production post-2015 has now been severely curtailed. We are reverting to a ‘two-and-a-half’ banks model that removes competition we desperately need in terms of credit availability and charges.

The question of the cost of banking is something that is going to loom increasingly large as the ‘foreign’ banks disappear and leave consumers to the tender mercies of our old ‘Big Two’. While the ability of the Government to interfere meaningfully in the decisions of RBS and Rabobank to quit the Irish market can’t be exaggerated, ICMSA has every right to expect our financial regulators to take a close interest in any adjustments the remaining banks propose making to their charges.

This is absolutely fundamental to the realisation of the very ambitious plans set out in Food Harvest 2020. Farm families will need access to credit to expand their production and invest in the plant and buildings required.

But if the remaining banks simply look on farmers as in some sense, ‘a goose to be plucked’, then all the increased targets contained in the report and in which the Government has set such store will remain just that: Paper targets.

The laying down of some unalterable ground rules for the banks in terms of the charges they can levy on farmers and SMEs will have to become a priority for the Government.

Running alongside these worrying changes to the banking landscape, I was in Saudi Arabia last week as part of an Irish food sector delegation.

The decision by the Irish Dairy Board to purchase a stake in one of Saudi’s leading dairy trading companies is significant and welcome. It gives IDB and Irish dairy products a vital foothold in the fast–growing MENA region and, together with the decision of Kerry Group to open an office in Dubai, sees our food exports actively going after the markets that the excellence of our food products deserve.

Of perhaps even more significance is the news that more countries are exporting whole milk powder to China, with nearly three times the amount of product sourced from countries other than New Zealand in the first nine months of the year compared to 2012.

Fonterra will remain the chief suppliers but any move by the Chinese to reduce dependency on that company must boost our chances of increasing our exports to what will be the key single national market.

Our products, marketing, and national branding are forging ahead, and our farmers’ ability to compete and succeed in any market is now an accepted fact.

The possibility of that being undermined by a regression in lending capacity and excess banking charges must be guarded against.

* John Comer is president of the ICMSA


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