Farm Ireland

Saturday 18 November 2017

Banks and co-ops urged to follow Glanbia's lead on loans

Siobhan Talbot, group managing director of Glanbia, at the 'MilkFlex' launch. Photo: Jason Clarke
Siobhan Talbot, group managing director of Glanbia, at the 'MilkFlex' launch. Photo: Jason Clarke
Louise Hogan

Louise Hogan

The country's co-ops and banks are being urged to set up new finance packages offering competitive loans to farmers after Glanbia unveiled a €100m fund linked to milk price.

Glanbia said they expected strong interest in the loans based on an interest rate of 3.75pc above the Euribor rate, currently at zero. The loans are targeted at their average suppliers expanding from 70 cows to 100 cows.

The ICMSA's dairy chair Gerald Quain said the scheme's milk price 'triggers' - which see loan repayments suspended during periods of low milk prices - would help suppliers.

He urged other financial institutions, including the pillar banks and co-ops to draw up "similarly flexible and robust schemes" to Glanbia's 'MilkFlex' fund which is financed by the Rabobank, Ireland Strategic Investment Fund, Glanbia Co-op and Finance Ireland.

Following the dairy forum meeting where interest rates figured strongly, TJ Flanagan, chief executive of the Irish Co-Operative Society (ICOS), said they hoped it would put pressure on the pillar banks to make a similar financial measure available.

"It would be great if other co-ops were in a position to do it but the smaller ones couldn't."

He said some of the pillar banks could go to other co-ops and team up with them to make funding available.

At last week's Dairy Forum meeting, the banks had been challenged about their interest rates' policy.

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Mr Flanagan said there was an "imminent crisis threatening dairy incomes and something needs to be done".


Tadgh Buckley from AIB Bank said they were writing to farmers to and asking them to talk to the bank before any major difficulties arise.

"We are not under any illusions - there is likely to be a lot of cashflow pressures," he said, adding there were no signs of any stress yet but it was early in the spring.

Farmers were in a better position than in 2009 and indebtedness was far lower than other countries, with the average dairy farmer carrying less than €100,000 in borrowings.

AIB already offer farmers interest only repayments in times of low milk price and they also tailor repayments to match times of high incomes, said Mr Buckley.

Sean Farrell from Bank of Ireland said a "cash flow challenge" was inevitable, but to date less than 25pc of dairy farmers are availing of overdrafts.

He said they have an Agri-Flex loan scheme for all farm sectors but would not be building in milk price triggers.

Mr Farrell said they offer interest free repayments for up to 12 months.

Ulster Bank stated there were larger debt difficulties in Northern Ireland where they have switched 80 customers to interest only repayments, compared with six in the South.

A spokesman for the Kerry Group said they have supported milk suppliers through their Kerry Agri-Business trading arrangements. However, it is understood they are not considering a loan facility.

IFA presidential candidate and dairy farmer Joe Healy urged other dairy processors to follow Glanbia's initiative.

"In addition, we have to see how a similar model can be rolled out to facilitate flexible lending arrangements for other farming sectors," he said.

EU Agriculture Commissioner Phil Hogan said he hoped the European Investment Bank (EIB) would recognise that this low cost loan concept was a good product for them to support.

He said they wanted to secure low EU interest rates to help farmers and businesses.

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