Battling back
Tuesday September 01 2009
As the local hub of agricultural commerce, the mart has long been at the centre of rural life. However, the mart's traditional place at the heart of agricultural trade means that it has been hugely exposed to the impact of the credit crunch in more ways than one.
As the Celtic Tiger roared and diversification became the norm, many marts made significant investments outside of agriculture.
Some of these investments have taken a hammering over the past 12 months and the collapse in these outside interests has seriously eroded the balance sheets of many societies.
The financial turmoil has also hit much closer to home with farmers and is affecting their buying capacity.
The banking system has become much more restrictive, not only on the people who can access credit but also how much they can avail of.
The knock-on effect of tighter credit is obvious at the ringside, with farmers buying fewer animals and being reluctant to aggressively pursue more expensive lots. Many farmer buyers are having stocking loans reduced or eliminated altogether, which hinders their capacity to purchase cattle.
Meanwhile, some sellers have no choice but to sell at any price to simply put bread and butter on the table.
The end result is depressed prices in the ring.
Exporters are not immune from the credit crunch either. Live shippers are reporting greater difficulty in sourcing finance to fund their businesses and marts are being put in the difficult position of trying to control credit exposure and keep the trade alive by ensuring plenty of buyers are around the ring.
Cork marts chief executive Sean O'Sullivan is concerned about the strategic effect the credit crunch will have on marts.
The banks' tightening of credit terms has already been seen in an increase in the number of farmer cheques which have been returned.
"We have had a lot more bounced cheques than before, but generally they come good on the second time," said Sean O'Sullivan.
"The banks are much quicker to reject cheques if a farmer is overdrawn by any amount," he explained. "Before, there was a bit more leeway."
The hangover of the property boom is also a worry for some mart co-ops. "A lot of marts were looking at relocating to out of town centre locations and cashing in on the value of their original site," Mr O'Sullivan explained. "I'm concerned that they have missed the boat on this one, at least in the short term. I just hope it won't put undue pressure on marts' survival."
Looking to the future, tighter credit is likely to mean that buyers will have to purchase fewer animals, although mart managers maintain that it is still too early to quantify the full impact of the crisis.
The marts' own credit terms have also come into play in the market.
"We have been extremely vigilant since the beginning of 2009 about how much credit we extend and we are revising this continually," said the Cork marts chief executive.
"But, so far, it hasn't had any detrimental effect on the business because all marts are applying the same credit terms," he explained.
"It means there is no longer any competition on credit between marts," he added.
Enniscorthy mart manager Toddy O'Brien described the credit crunch as tough on everyone. "Anyone who is still in the game is in it for the long haul, and we need to get the mix right on credit availability," he said.
"There are good potential buyers out there but it can be hard to get cash flow through the system," he explained.
"They are all genuine people, trying to do their best, but they have been placed in the same pile as builders by the banks," Mr O'Brien said.
"It's very tough at the moment, with winter finishers trying to get money to buy weanlings in September and October.
"If they can't get money and decide to drop out of the business, that would be a fierce loss because they are a vital cog in the cattle industry," he insisted.
- Caitriona Murphy
