A plea for all sectors of the economy to unite in supporting farming through “a perfect storm” has been made by the managing director of a leading agri-business.
Liam Woulfe, MD, Grassland Agro Ireland, expressed his concern at difficulties being experienced by farmers in all mainstream enterprises in 2016, when he was guest speaker at the Strategic Banking Corporation of Ireland (SBCI)/BDO Corporate Finance breakfast briefing seminar on ‘Funding Strategies for the Food & Agri Sector’ breakfast briefing in Limerick last Friday.
He told the agri-business gathering that all mainstream sectors within farming are going through a unique period at the moment. “We are in a perfect storm, but that is only a passing phase, and there is no doubt that brighter days are ahead.”
He added: “I meet a lot of people who are finding the going tough. It is going to be a tough year for every business, but the most important thing is to see it as a passing phase.
"We as business people and supporters of everybody, we need to support each other and make sure that 2016 is remembered for how well we all pulled together rather than anything else.”
Turning to the business of servicing farming, he said: “Whether you are in the service industry or providing finance, go out of your way in 2016 to understand the challenges of the sector, rather than concentrate on the special problems of individuals, because we need to see a way through.”
The farmer’s son from Ardagh, Co Limerick (his brother Jim is the Dairygold Co-op CEO) had a career with NCF, Golden Vale plc, and Kerry Group, before embarking on a successful entrepreneurship in agri-business.
At the breakfast briefing seminar, he also expressed his concern about the potential of land purchase to deliver a return and a lifestyle for farmers.
“One of the things that I am very concerned about long term is that farming is a devotion to a lifestyle.
“There is no doubt about it, it is hard to sustain the intensive nature of the seven-day week all of the time.
"It needs to get more attention, because in all walks of life, there are all kinds of regulations about how many hours of work in a week, and regulations have been brought into place in order to improve the ability of people to think better.
“It is hard to think better if you are absolutely stuck to the grindstone for every minute of every day doing work that maybe could be done at a different rate per hour, but most important of all, you need to think about a lifestyle for succession down the road.
“My theory is that you don’t buy the field down the road or the business totally on your capacity to finance it.
"It has to be driven primarily by what that extra unit can do for you, and not for the sake of having it. Why get bigger if it is not going to be better? Add the extra piece totally on its ability to perform for itself.
“On the immediate outlook in food and farming, I see no difference between dairy, beef or grain.
"The same issues are there, and 2016 is being really tough, with the importance of cashflow planning imperative, but the most important thing is that nobody should be left to feel that they are alone.
"Everyone has a part to play in the chain and a short-term remedy is not the solution.
Mr Woulfe added: “Within farming, there needs to be a plan for more efficiency, for more sustainability, because the EU and its environmental policies are going to come down heavy, and the most important thing is to be ready for it and have scale at farm level.
“I see some land being traded which has zero hope of paying for itself. On a stand-alone basis, I can’t imagine any acre of land for normal agricultural output has the capability of any return on investment.
“Therefore, the biggest challenge is trying to see what you can do with the asset you have, which is worth a lot more than its return on capital, and how can you make it better.
“New technology needs to be examined, and the need to be a lot more prosperous and lucrative rather than saying that every cost has to be avoided. You should be growing your business to make more money, you are investing to make more.
He concluded: “Avoiding costs because you are not making money is not savings at all, because you must study between what is an investment and a cost on a farm or in a business, and see can it make a return for you.
“It is very important that you can see a return for what you invest. That’s what it should be all about in farming or business.”
His final word of advice was: “If your bank is the problem, you should look at the business you are in”.
Strategic Banking Corporation providing loans
Borrowings by Irish farmers in the past year accounted for one third of the loan funding provided by the SBCI through on-lenders, principally the three mainstream banks, AIB, Bank of Ireland, and Ulster Bank.
Nick Ashmore, CEO, Strategic Banking Corporation of Ireland (SBCI) said €675m in support funding had been taken up by the three main banks in 2014, with a 24% increase in loan approvals.
He told a breakfast briefing at Limerick on Friday that 85% of the loans were approved to applicants from outside of the greater Dublin area.
“Farmers were significant borrowers, with one third in volume going to farmers within the past 12 months.”
He said that the vast majority of the loans had been approved for investment purposes rather than working capital.
The additional funding of €50m being provided for purchase and lease of machinery in the agri sector through First Citizen Financing would be of further benefit to the farming sector.
“But there are issues around the price of land, and we don’t want to be supporting and should not be supporting land acquisition, but farmers are actively investing in their own business and we are seeing that coming through”, said Mr Ashmore.
Up to the end of 2015, some €56m in loan support from SBCI has been deployed in Munster, and €22.7m “of that has gone to farmers”, with a good spread across the counties in the province, with Cork the leader.
He said the newly announced First Citizen Finance loan facility was another step in delivering low-cost, more flexible funding for Ireland’s agri-business and SMEs, which already account for 26% of all SBCI loans.
Chris Hanlon, managing director, First Citizen Finance, said they looked forward to delivering a high-quality nationwide service, and the partnership with SBCI will provide low-cost loans repayable over periods of up to seven years.
Its €50m fund is on offer to agri-businesses seeking to buy or lease machinery, including tractors, combine harvesters and balers.
Formed after Ireland’s exit from the EU/IMF programme in late 2013, the Strategic Banking Corporation of Ireland received initial funding offer from Germany’s Kreditanstalt fur Wiederaufbau, the European Investment Bank (EIB), and the Ireland Strategic Investment Fund, a new fund to which the assets of the National Pensions Reserve Fund were transferred.
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