Subdued milk prices and rising input costs have tightened cashflow on NI dairy farms over recent months, representatives from local banks have said.

“The utilisation of overdrafts is certainly at a far higher level than it was this time last year. In some cases, overdrafts have had to be increased,” said Cormac McKervey from Ulster Bank.

McKervey said a small number of customers have temporarily moved to interest-only loan repayments, although this has been mainly driven by cashflow issues due to TB breakdowns.

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He said others have extended the payback period on longer-term loans to help ease monthly repayments. McKervey highlighted that Farm Sustainability Payments, which were issued by DAERA in early September, were quickly used by dairy farmers to cover bills from the summer months.

He also pointed out that the strong trade for dairy calves and cull cows has been an important income stream for dairy farmers during the recent lull in milk prices.

“Another factor is milk solids. When there is a poor milk price, those farmers with good milk solids who are three to 4p/l above base see a serious difference compared to those who are at base,” McKervey added.

Similarly, Rodney Brown from Danske Bank said that the “headroom in overdrafts” for some customers started to tighten from July onwards.

“Farm Sustainability Payments did give a bit of relief, but they seem to have been eaten up relatively quickly. It means that headroom which was needed into the winter is gone,” Brown said.

His advice to farmers is to start drawing up a cashflow plan, which includes the predicted movement of money into and out of the business over the coming months.

“If you are a dairy farmer and you have seen cash dissipate over the summer, you know its heading in one direction. Sit down now and look ahead for the next six months,” Brown said.

“Build some sensitivity into it and keep it under review because changes in milk prices or input costs can change the look of your cashflow quite quickly,” he added.