Farm Ireland
Independent.ie

Thursday 19 October 2017

IFA seeks €200m loan to ease merchant debt crisis

Low interest rate credit from Europe to help keep cash flowing

Caitriona Murphy

Caitriona Murphy

The European Investment Bank is being called on to provide a lifeline to an Irish agriculture industry struggling with more than €550million in credit to farmers.

With farm costs at an all-time high, the IFA has called on the Taoiseach and Ministers for Finance and Agriculture to secure €200m of low interest rate funding from Europe.

The hope is that the funding would allow farmers to restructure farm debts over a period of three to five years.

While co-ops and feed merchants remain loathe to reveal the extent of the credit extended to farmers, experts believe farm debt with merchants to be at least 45-50pc higher than normal this year.

One industry insider estimated the credit bill on feed alone to be in the region of €350m, with the fertiliser credit bill topping €200m.

The figures are based on a national feed consumption of 3m tonnes and national fertiliser consumption of 1.2m tonnes. More than 60pc of the annual feed bill in Ireland has already been sold, with an estimated 60pc of that "on the tab".

Fertiliser sales are always front loaded in the year and are running at 75pc of the annual total, with 60pc sold on credit.

These figures do not account for the imported fodder, vet bills and animal removal charges that are all hanging over farmers after the worst weather and fodder crisis in living memory.

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IFA vice president Eddie Downey said the provision of a low interest rate loan from the EIB would allow farmers to restructure their debt and create "breathing space" for the rest of the agriculture industry.

"What we need is to amalgamate all the existing debts that farmers have with their feed merchants, co-ops, vets and contractors. If that money could be cleared off the books and paid back by farmers over a longer term at a lower interest rate, it would allow cash to start flowing through the chain again," he maintained.

PRESSURE

Merchant interest rates of 1-1.5pc on feed and fertiliser will add further pressure over the coming months. Other rates include 8-9pc on overdrafts and 5pc on terms loans of three to five years.

EIB loans, distributed through the Irish banks at a rate of 2-2.5pc, would ease pressure on both farmers and the agri-businesses that have so far acted as bankers in the crisis.

While the exact mechanism for repayment of an EIB fund loan would be dependent on the terms and conditions agreed by the government, it is likely that a farmers' single farm payment could be used as security in any loan drawn down.

Crucial to the success of an EIB loan scheme would be that the loan could be used for working capital, which has always been specifically excluded in the terms for previous funds.

However, on May 17 the EIB agreed to provide €500m in funding to the small and medium enterprise sector in Spain, which included the option of using it for working capital needs of small businesses.

Irish Independent