AIB confirms ongoing farm investment

AIB agri advisor Donal Whelton communicated a very upbeat message regarding the future prospects for farming when he spoke at the recent Listowel Food Fair.

He also discussed recent requests for finance and outlined the credit application process while participating at a seminar entitled: ‘Financing the Farming Sector’.

Whelton also shared his experience on the level on-farm investment that is currently taking place.

“We are seeing ongoing on farm investment across all farming enterprises as farmers seek to increase efficiencies and better position their farms for the future. This investment is for a range of purposes including investment in infrastructure, machinery and equipment, land purchase and stock purchases. The decision to remove milk quotas has resulted in increased investment in the dairy sector in recent years, but farmers across all sectors are investing in the future of their businesses,” he further explained.

Whelton discussed the opportunities for the sector presented by a growing world population, rising incomes and changing diets in developing countries, but noted that there are challenges ahead.

“Ireland is well placed to capitalise on these opportunities, but there are also some challenges ahead for the sector. Volatile commodity markets have become a feature of the sector in recent years. In the period 2007 to 2009 farm incomes fell by more than 40 per cent to their lowest levels in over a decade, but between 2009 and 2011, farm incomes increased by close to 120 per cent and reached their highest ever level. This level of volatility has a significant impact on family farm income and makes financial planning now more important than ever.”

Whelton’s comment were a follow-on to the presentation made by his colleague Pat Butterly at the recent Teagasc Liquid Milk Conference.

Commenting specifically on the prospects for dairy Butterly said: “Ensuring that cashflows remain adequate over the long term will remain a crucial component of future farm management strategies implemented here in Ireland. In achieving this goal, producers must strive to build up reserves during those periods when margins are strong. Taking this approach will also encourage the banks to provide the support that farm businesses wil require, during those period when market prices dip.”

Butterly strongly advised farmers to develop a clear and coherent plan for their businesses.

“The advice of Teagasc advisors and accountants should be sought in developing a farm plan. The actual process of thinking through the opportunities and challenges that lie ahead will allow farmers take a more strategic approach when it comes to planning for the future,” he commented.

“Crucially, a well-thought-out farm plan will allow take a proactive approach to be taken when it comes to managing their businesses. Issues such as the development of new infrastructure, the purchase of additional land and extra labour costs can be factored in along with the extra income levels that will be generated.

“Our own research shows clearly that a high proportion of Irish dairy farmers intend developing their businesses, once quotas end in 2015. For many this will entail the securing of additional finance.

“From a bank’s perspective issues such as a proven ability to re-pay previous loans and the availability of accurate cash flow/income projections will be taken into consideration when it comes to deciding on whether or not additional finance will be made available to individual clients.”

 

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