Farmers Feeling Credit Crunch

Written by Mark O'Brien

More farmers are beginning to believe that the credit crunch is hitting their business’s despite the fact that it has been found that the major banks are still supporting the industry. Following a new banking survey produced by the National Farmers Union (NFU) one in four farmer members say they are at risk and will be affected by the current economic climate compared to just one in six farmers in December. It's also revealed that the major banks are still supporting the farming industry through lending and are taking on the same proportions of new business.

However in some cases it seems many farmers underestimated the significance of credit problems to their business in 2008 and that the terms and conditions as well as interest rates are becoming more burdensome in 2009. Currently a farmer can expect to pay less than five per cent interest on new overdrafts and loans while one in seven are paying over eight per cent.

"The banking sector is still taking a relatively favourable line in terms of the availability of lending to farmers, although it is clear that there has been a shift in both the rates and terms offered. However, what the results also show is a risk of complacency, with more producers now indicating credit is a bigger risk to their business, especially tenant farmers. With major capital costs looming to meet new environmental and animal welfare rules, there is every risk that credit could be a major issue for many producers.The NFU will continue to keep a watchful eye on the credit conditions and seek to ensure that lending continues through the year." NFU Economist James Edwards.

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