Given the rise in commodity prices, is the bank seeing more debt being paid down by farmers?

In general, no. I believe that farmers are using the strong commodity prices in dairy to make expansion-related investments on their farms and to pay down creditors that may have built up during 2016. No doubt, 2017 was a difficult year for tillage farmers due to weather and prices. Uncertainty around beef price was a key issue for the beef sector.

What impact did the Government’s low-cost loan scheme have in driving borrowing?

The scheme created a lot of interest and activity in the first half of last year. It was used to support working capital requirements and it enabled farmers to manage the financial pressures that might have prevailed on their farms as a result of the challenges they faced in 2016. The attractive interest rate on this product allowed farmers replace more expensive forms of credit with a low interest structured loan.

What sector is driving increased borrowings/debt on farm?

Irish farmers on average have a sound financial structure, with debt-to-asset levels quite low by European standards. In Ireland, dairy farmers have been the most active. Their debt levels on average have always been higher than the average debt on all Irish farms.

How many years are farmers taking out the average loan for capital expenditure?

Typically, farmers are buying breeding stock over a five-year term, farm buildings over a term of up to 15 years and land over a term of up to 20 years.

We have also seen increased demand in our pasture loan for farmers which allows them invest in grazing infrastructure, ie lime, reseeding, soil fertility, roadways, water, etc, for a term of up to five years.

Are dairy farmers taking out loans for expansion over a sufficient period?

Due to the strong milk price during 2017, dairy farmers were tempted to make medium- and long-term investments from cashflow. However, I think that a lot of experienced farmers learned some hard lessons in 2016, when milk price was low.

They had invested in their business during 2014 and 2015 from cashflow and then needed to avail of interest-only options on their loans during 2016 or seek additional working capital facilities. I think during 2017, dairy farmers were more prudent and perhaps put something away for the rainy day.

Are you seeing any farms in difficulty relating to incorrect cash-flow management?

Not at the moment. This issue was prevalent in 2016 when milk price was low.

Would the bank welcome another Government low-cost loan scheme similar to last year?

Ulster Bank is committed to supporting Irish farmers and will consider participating in any scheme introduced by the Government to support the sector.

What do you see as the biggest challenges facing farmers in 2018?

Despite a positive outlook for key farming sectors, there are some key challenges ahead such as Brexit, CAP reform, price volatility, fodder crisis, the requirement to further improve environmental sustainability on our farms, and inadequate availability of skilled labour. However, when considered together, I believe that the opportunities for the farming sector far outweigh the challenges.