Irish banks and credit unions are being called on to pass interest rate cuts announced by the European Central Bank (ECB) back to farmer borrowers.

The Irish Creamery Milk Suppliers Association (ICMSA) said that, in light of the ECB's interest rate cut last week and the fact that the interest rate is now 2%, banks and credit unions should "spell out their policies in relation to passing back ECB interest rate reductions to farmers".

The farm organisation also called on lenders, if they have not done so already, to pass back the reduction to borrowers who had seen rates rise dramatically over the last number if years.

The farm organisation cited data from the Central Statistics Office (CSO) that shows that net interest payments for farmers increased from €63.5 million to €161.6 million in 2024.

Although this figure "obviously doesn't tell the full story at an individual farm level", ICMSA president Denis Drennan said the increased interest rates "added to the pressures in 2023 and 2024, which were difficult years for farmers in Ireland".

According to an ICMSA survey of some 500 of its own members, carried out in February, 45% of its members were paying between 5% to 6% for farm debt while 13% were paying over 7%, which would give a minimum margin of 3% to banks at present.

Drennan said this is "completely excessive given the quality of the agriculture loan book and low default rate".

"Banks have seen ECB rates come back substantially in recent months," Drennan said.

He called on banks to spell out their policy in terms of returning interest rate reductions to farmers.

"They were very quick to pass on the increases and you would hope that they will be as quick passing back the reductions," he said.

Drennan advised farmers to check with their banks on what interest rates they are paying and whether they received the interest rate reductions.

He also advised farmers to look at refinancing with other banks or credit unions where a more favourable rate is available.

"With the substantial investments that have taken place on dairy farms, in particular over the last ten years, interest rates are a critical cost in terms of farmers’ margins and ability to repay debt," Drennan said.

"Banks need to pass back interest reductions immediately," he added, advising all farmers to review their current interest rates and consider alternative sources of funds if the interest is "out of line with market realities".