Opinion

Cheap finance is the thin end of the CAP wedge for farmers

The IFA’s commitment to Irish cereal growers is laudable. It seems the organisation will do all in its power to ensure that Irish tillage farmers are made eligible for the EU exceptional adjustment aid scheme.

And rightly so. But that’s as good as it gets from the team at the Farm Centre.

The current indications are that IFA is prepared to sign off on a support measure that would see the bulk of the money made available in the form of cheap finance to farmers. And this is a strategy that has both short and long-term implications for Irish agriculture – all negative.

Fundamentally, farmers need more money coming into their bank accounts – not more debt. Irrespective of the interest rates made available, debt has to be paid back. And this reality – by its very nature – serves only to put more pressure on farm businesses.

Acquiescence now by Ireland to a support scheme that has higher debt levels written all over it will, invariably, encourage the EU Commission to look at this type of initiative in the context of its longer term reviews of the CAP. And, in truth, the vista of farmers supporting a cheap food policy – a key objective for EU strategists – should be total anathema for Irish agriculture.

The other dimension to the ‘cheap finance’ support concept is the involvement of the banks. Ireland is already burdened with the highest interest rates and finance charges in Europe. My clear understanding is that money made available by the European Investment Bank has to be channelled through commercial banking businesses in each Member State.

And that, in my opinion, is a recipe for farmers to be bamboozled with small print conditions in loan arrangement that could make the money offered by Europe not as cheap as the decision makers in Brussels might have originally envisaged.

The principle of making loans available to farmers has other divisive consequences. For example, the banks might turn around and deny individual farmers access to the envisaged European money, based on producers’ previous banking records. So we could find ourselves in a situation where those farmers who are in most need of support being denied access to it. And, as we all know, the banks are more likely to lend money to those farmers with a larger asset base than their smaller counterparts.

So what should the IFA be signing off on, when it comes to the implementation of the exceptional adjustment aid scheme? The most obvious option would be to push for the introduction of coupled support measures for farmers across all the various sectors. This would be fair and equitable from an overall financing perspective while, at the same time, putting a strong support focus on production agriculture.