Bank of Ireland has reduced downwards its outlook for farm profitability in 2024 as the poor weather conditions continue to take a toll.
Eoin Lowry, head of agriculture with Bank of Ireland, told the National Fodder and Food Security Committee (NFFSC) the bank is “very conscious” of the current challenges on farms, but added that not every farm is in financial strain.
“In terms of cash flow, we are not seeing a significant uptake in applications in recent weeks, that’s not to say that there aren’t farmers in financial or cash flow difficulty,” he said.
Lowry said that overdraft utilisation rates are trending at similar lows to this time last year at around 14%.
“That means that there’s plenty of overdraft capacity on the majority of facilities that we have in place to the tune of something like €300 million of capacity there.
“So there is capacity on overdrafts for farmers that are looking for that piece of additional working capital to pay bills or to pay for straw, that is an option,” he said.
Farm profitability
Lowry said that farm debt is at the lowest level in the last 25 years. He said recent data from the Central Bank shows that debt levels in 2023 were 2% lower than the previous year.
He said that feedback from contractors, merchants and co-ops is that they are left with unpaid bills as there are significant issues on some farms.
“The two big issues that we see are cashflow driven by increased costs, poor performance and cost overhangs maybe coming from last year where bills are not paid,” he said.
Lowry said that some farmers may have used up cash balances to finance on-farm investments in 2023.
“The second one is probably a little bit more longer term and that is farm profitability. It is probably going to be negatively impacted in 2024.
“We’ve adjusted down our outlook for profitability in 2024. We don’t see a significant uplift coming in commodity prices to curtail the potential of reduced output, be it milk or grain yields.
“While the price per tonne for key inputs such as fertiliser and feed may be back, the actual costs will probably high on a number of farms due to their increased usage,” he said.
Bank of Ireland
Along with engaging with farm organisations, merchants and co-ops, Bank of Ireland has established an “agri weather crisis squad” in recent days.
Lowry said the bank will be launching a campaign to outline available supports for farmers and reaching out to customers through its branch network.
He urged any farmer in need of financial help to reach out to financial institutions.
“We’re very conscious, again given the feedback, on the prioritisation of speed of access to finance is really critical and important right now.
“We are prioritising agri applications through our system to ensure that they flow swiftly to drawdown stage for farms,” he said.
AIB
Donal Whelton, head of agri, food and fisheries at AIB, told the meeting that the bank has a 30% increase in the level of unutilised working capital limits currently available to farmers, compared to the last fodder crisis in 2018.
He said the bank also recognises the financial stress currently on farms and will embark on a four-week campaign highlighting supports for the sector.
Similar to other financial institutions, Whelton said that AIB has access to funding through the Strategic Banking Corporation of Ireland (SBCI), including a working capital element.
He said that all AIB staff have been updated on the impact of what is happening on farms due to the prolonged wet weather.
Whelton said that working capital requests from farmers will be prioritised by staff and that information requested from customers will be proportionate to the level of support sought.
“It’s a very, very positive sector for us and we’re going keep continuing to support the sector through this current difficulty it has,” he said.