Hard-up farmers need trusted mediators to tackle perilous financial woes
Published 13/04/2010 | 05:00
One could be forgiven for not listening to the Irish news these days. NAMA, Anglo Irish Bank, The Quinn Group, strident teachers: the negativity is relentless.
Even in the good times, businesses come and go. It's the sheer volume of bad tidings now in the news that is scary. Also it's the suddenness of the boom to bust that has hit Ireland. It's no longer millions, now debts come in billions.
At the same time, many parts of the world are already out of the recession. So this is also a time of opportunity for those with the pluck, the good ideas, the energy, and those that still have access to cash. Now there is value to be had. The time to invest is when asset values are low -- not at the peak. Even if interest rates double or treble, they will still be low on a historical basis. Last year, five-year money was costing a base price of 2.8pc. Currently, I believe it is at 2.55pc.
Unfortunately for a lot of farmers, the issue is survival rather than expansion. Livestock is being liquidated to keep the car on the road, children at school and to pay ESB bills etc.
Given the trend in farm incomes over the past couple of years, as verified by Teagasc and the CSO, it's no surprise that a whole new bracket of farmers are unable to meet their financial commitments. Many of these are young farmers experiencing their first hard jolt.
The financial hard cases are appearing on several fronts. There is a large group whose cash flow has been hit by the farming downturn and whose business and turnover was never large. This group is working with the Farm Assist, which last year paid out close to €100m to 9,000 farm families. The average payout was about €210 a week, which is on a par with the Job Seekers' Allowance.
According to banking sources, there is another group which expanded in dairying and tillage. They borrowed to expand in buildings and machinery, even to buy land. With the poor weather and bad milk or grain prices, these farmers are unable to make repayments. However, a major lift in milk and grain prices would help refloat them. While the price lift may happen in milk, the grain outlook is bleak.
Another group with financial problems is those who invested in off-farm domestic and foreign property, using inflated land prices as collateral. Some of these cases are the stuff of nightmares. Ironically, the same consultants that encouraged the initial investments are still around -- only now they are trying to negotiate deals with banks.