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Cash flow headaches ahead for farmers warn banks


Growth Potential: The 79ac farm is described as the best of tillage ground.

Growth Potential: The 79ac farm is described as the best of tillage ground.

Growth Potential: The 79ac farm is described as the best of tillage ground.

FARMERS are being urged to plan carefully for a potentially "very difficult" cash flow period in the run-up to next summer.

Senior agricultural executives for three of the main loan providers to farmers - AIB, Bank of Ireland and Ulster Bank - have said they are "very conscious" that farm families may require additional borrowings to tide them over until May 2016.

Strong incomes in the dairy sector during 2014 provided some farmers with easier cash flow so far this year.

However, the combined effect of higher income tax bills for 2014, and hefty super levy liabilities coupled with the lower milk prices, is expected to hit many farmers before the end of the year.

Sean Farrell, head of agri business with Bank of Ireland, confirmed that the bank is "already receiving some demand from farmers who are planning their cash flow between now and the end of the year".

He said they were advising individual farmers to contact the bank to indicate their likely requirements "sooner rather than later".

North Tipperary based, Pat O'Meara, regional agri advisor with AIB, said the bank was aware that pressure "may arise as tax bills fall due this autumn which may require bank finance". He said they were prepared to offer facilities for a phased repayment over the following months.

Mr O'Meara said that managing finances until "getting to milk cheques in May 2016 will be the most difficult period" for many farmers, with some needing assistance as the full effect of the lower milk price this year impacts on their cash flow.

Dr Ann Marie Butler, agri business development manager with Ulster Bank, said the bank has a policy of encouraging farmers to "consider having some form of nest egg, or sinking fund, as a buffer" to cushion volatility.

However, to date she has not seen "any stress" on farmers because cash flow so far this year has been strong - something Mr O'Meara and Mr Barrett also highlighted.

All of the financial institutions said they would support additional temporary financial needs and discuss requirements on a one-to-one basis with farmers should it arise.

Income tax liability for many dairy farmers, due for payment in October and November is expected to be at a record level for the sector.

It comes after the Teagasc National Farm Survey showed average dairy incomes at €68,877 - the highest return for the sector since the introduction of the study 42-years ago.

The proportion of dairy farmers with incomes in excess of €100,000 has continued to increase, and with limited allowances for depreciation remaining on their accounts will be paying the top rate of tax, USC and PRSI on a substantial portion of 2014 income.

The liability comes against the falling milk prices and depreciation and other allowances which have run out for many of the developed farmers.

Tillage farmers were the next highest earners in 2014 at an average of income of €28,468, with other sectors expected to have far lower bills.

Indo Farming