As the future of EU farm subsidies – which accounts for around £260m in Northern Ireland – is in doubt, banks are asking farmers to take a forensic look at their businesses to see if they could survive if the subsidies were removed.
Farmers are being told to take action to cut costs and think carefully about any major capital expenditure such as buying machinery or land unless the business cashflow can support it.
However, there is a growing concern among banks that some farmers are not aware of exactly how their farm businesses are performing and have no idea of their financial status.
Some of these farms have been on the radar of local banks for some time but now, ahead of any Brexit clarification, the banks are calling time on those farmers’ loans, asking them to pay them off in full and leave the bank.
If the farmers cannot pay back the loans, the worst case scenario is that they will lose their farms.
Danske Bank is one of the locally based banks that has issued some of these letters to farmers, but insists that this is standard with any bank no matter what the business is, if it is not performing or has to safeguard plans for the future.
Robert McCullough is the head of agribusiness at Danske Bank in Northern Ireland and said «a small number» of farmers would have received the letters.
He also said farmers should be realistic in accepting how they are currently performing.
«Some struggle at different levels to others and for a variety of reasons, which may not all be debt related,» he said.
«In relation to debt, I would suggest that there are a relatively small number of farmers across the dairy industry who will find recovery from the crisis challenging and without radical change will not be in a place to take their enterprise through the next downturn.»
When referring to farmers receiving exit letters the banker said: «Reality is that this is just business as usual with any bank.
«On the back of that there are a very small number who are not prepared to adjust their businesses to help future-proof them and hence will have received letters. The vast majority of farmers have commenced repayment plans at a level that should tie in with their cashflow.
«Primarily we supported farmers through our dairy support loans but in some cases where capital holidays were required on loans, these have all been reinstated back to capital and interest.»
With milk prices having recently increased, dairy farmers are starting to increase their cashflow.
«I believe the long term outlook for the dairy sector is good provided we can sort out market access and cross border issues post-Brexit,» the banker added.
Source: BelfastTelegraph
Link: http://www.belfasttelegraph.co.uk/news/northern-ireland/northern-ireland-dairy-farmers-asked-to-repay-loans-and-leave-banks-35494195.html