Against expectations total borrowings by the UK agricultural industry have risen to their highest level for over 17 years for quarter one, according to the latest Bank of England figures, released today (12 May 2004).
At the end of March 2004, farming debt stood at £8.197 billion, an increase of 2.89% on December 2003 figures and an increase of 3.45% on March 2003.
Commenting on the latest figures, Tim Porter, Agriculture Director, Lloyds TSB said:
"These figures are an unexpected surprise since the buoyant UK grain market has allowed some arable farmers to reduce their borrowings. The majority of subsidy payments have been received on time over the winter which also helps take the pressure off farm borrowings.
"Based on our own figures it is livestock farmers who are requiring extra cash flexibility - specifically dairy farmers. Feed and milk quota prices have increase but milk prices remain level."
Despite this increase in debt, Mr Porter explains that there is good evidence that farm assets are increasing in value, particularly farm based property on the back of a strong housing market. This is important for farmers as it helps maintain their owner equity.
"While we note an upward trend in asset values, the serviceability of debt should remain a focus for farmers as it still has to be paid from trading profits.
"We recognise this issue, and have doubled the number of agricultural specialists in our business. Their specific role is to help farmers through the budgeting and planning process which is especially important during the pending changes of the Fischler Reforms and the predictions of further interest rate rises."
