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Total debt levels in the NI agriculture industry have hit the £1bn mark for the first time in almost three years.
Figures obtained from consultancy firm UK Finance indicate that total borrowing on NI farms stood at £1,010m in June 2019, representing an increase of £39m or 4% year on year.
At the end of last year debt stood at £957m, but has risen in 2019 to stand at its highest level since September 2016. Back then, prices were depressed across farming sectors and additional borrowing to address cashflow issues was common, particularly in dairy.
Local bankers indicate that a key factor influencing total debt levels this year is the purchase of agricultural land. The NI land market has been largely unaffected by Brexit uncertainty and prices have continued to move upwards in most parts of NI.
Although cashflow is under pressure on some local dairy farms at present, it has not caused higher debt levels so far.
However, lower milk prices and heavy losses incurred in the beef sector throughout 2019 are reflected in farm bank accounts. Figures from UK Finance show that total bank deposits in NI agriculture stood at £386m in June 2019, which is down £41m or 9.6% year on year.
Investments
According to Ulster Bank’s senior agricultural manager Cormac McKervey, Brexit uncertainty has put farmers off making investments within their farmyards in recent months and the trend should be reflected in total debt figures for the second half of 2019.
“We didn’t see it up until August, but lending went down in September and October because farmers did not want to make investments until they see how Brexit pans out,” he said.
Another factor that could affect total farm debt in NI in the third quarter of 2019 is smaller stocking loans being taken out by beef finishers, following significant losses last winter.
“A lot of mid-sized finishers with 200 to 400 head of cattle are keeping lower numbers than last year,” McKervey said.
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