Farm Ireland

Tuesday 24 October 2017

Farm contractors face credit crisis

Diesel costs increase 44pc as distributors tighten credit lines

Martin Ryan

SOARING green diesel prices are forcing some contractors to turn to farmers to fund the cost of fuel for their silage harvest.

The cost of green diesel is 44pc higher than last year, although the base price for crude oil is unchanged.

Distributors have also tightened up on the discounts being applied to farmers, the IFA has claimed.

In addition, credit terms to contractors have been tightened by oil distributors and some contractors are no longer able to carry the burden of diesel costs and are requesting farmers to supply the fuel.

"Some of the contractors are now asking the farmers to supply the diesel for silage cutting because they cannot afford to fund it," said Tom Murphy of the Professional Agricultural Contractors of Ireland (PAC).

"The distributors have also tightened on credit to our members this year and they are now under pressure for finance from all sides and cannot get oil on credit."

The cost of commercial [white] diesel is 17.7pc up on last year, but farmers are paying 30pc more for agricultural diesel, although the only difference in the product is the addition of a dye for excise purposes.

And the total increase in the farm gate price of green diesel comes to 44pc when the National Oil Reserve levy and Government Carbon Tax are added to the oil companies' price.

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"It is totally unacceptable that farmers should be paying more for diesel because it is green," said Mr Murphy.

"I cannot understand the difference in price between commercial and agricultural diesel -- they are both the same except for the colour.

"The importers must clarify the situation immediately.

"Oil is the biggest single cost for contractors and they are finding it very hard to fund it in the tighter credit situation", Mr Murphy added.

IFA members around the country are reporting a current farm gate price of 69c/l compared to 48c/l this time last year which indicates that discounts have been reduced by around 13pc since 2009.

"The huge increase in green diesel this year compared to last is a further cost to already hard-pressed farmers who are unable to pass their cost on to the market," said IFA president John Bryan.

"Industry and Government must reduce their costs to reflect the harsh realities of trying to survive at disastrously low commodity prices," he added.

The retail distributors have defended the price increases, stating that they pass on increases charged by the oil companies.

Maxol Group chief executive T J Noonan said prices varied through the year depending on the demand for particular products.

"By way of example, motor fuels generally get dearer in the summer months, while the price of heating oil during the same period can often fall," Mr Noonan said.

Irish Independent