Credit deal a step closer after ICMSA bank talks
An initiative to allow dairy farmers to bypass potentially crippling Irish banking terms and interest rates is moving into its next phase.
ICMSArepresentatives have already held talks with Dutch bank Rabobank to allow farmers to access cheaper and more plentiful credit. Formal negotiations are due to start in coming weeks.
"We are concerned that Irish banks will be limited both in the amount of credit and on the interest rates they will be able to offer," said ICMSA president Jackie Cahill.
Up to €2.8bn could be required by Irish dairy farmers between now and 2020 to ramp up milk output by the 50pc target set in the Food Harvest 2020 report, according to an ICMSA study completed in conjunction with Merrion Capital and UCC dairy economist Michael Keane.
However, the organisation claims that at current milk prices Irish farmers are well positioned to handle extra debt due to their low levels of indebtedness. The ICMSA say that co-ops are prepared to facilitate credit arrangements on behalf of foreign banks for farmers. They also claim that transaction charges can be further reduced by streamlining credit security if standard conditions for the registration of a charge against land are established.
In addition, the report states that mortgages known as chattel mortgages should be made available to farmers on the strength of long-term leases on land to facilitate expansion of units over the coming years.
The initiative comes at a time when a series of interest rate rises have been flagged by the European Central Bank. A spokesman for the ICMSA said that continental banks would be able to offer interest rates up to 2.5pc lower than what would be on offer from Irish banks. "There is no way that Irish banks should be allowed leverage over blue-chip dairy farm businesses to sort out their own balance sheets," he said.