New farm loans link repayments to milk price
A €100m fund linked to milk prices has been launched for dairy farmers who want their business to expand in the face of volatility on the markets.
The 'MilkFlex' fund will provide loans from €25,000 up to €300,000 to dairy giant Glanbia's 4,800 milk suppliers, with in-built triggers that can adjust repayment terms to respond to change in milk prices.
Siobhan Talbot, group managing director of Glanbia, said the fund aimed to deliver competitively priced and structured dairy finance. "This product is designed to match the cash flow generated by a dairy farm enterprise, with no repayments during certain times of low prices and increased repayments at times of high prices," she said.
Around €50m of the fund will be available from May, with the investment fund coming from the partners Rabobank, the Ireland Strategic Investment Fund, Finance Ireland and €6m from Glanbia Co-operative Society. The interest rate charged on the loans will be at a variable rate of 3.75pc above the Euribor cost of funds which is currently at zero.
Loan repayments will be automatically deducted from the suppliers' milk cheques by Glanbia Ingredients Ireland and will reflect the seasonal milk curve with no loan repayments during low production months from November to February.
New loans to farmers rose by nearly 20pc over the last two years to €643m in 2015. Agriculture Minister Simon Coveney said he believed this would "shake up the banking system in Ireland" in terms of their approach to dairy farmers.
He said farmers supplying other dairies will demand similar loans.
EU Agriculture Commissioner Phil Hogan said he hoped the European Investment Bank (EIB) will recognise the benefits of the concept and create better deals for farms and small businesses. The loans will be unsecured but will be made as priority deductions.