Farmers must get paid properly for they work they carry out and the investment that they make within their businesses.
This was the key take-home message for Ulster Bank’s head of agriculture, Cormac McKervey, who spoke at this week’s launch of Balmoral Show 2023.
“When farmers do not receive proper payment, food production suffers. A perfect example of this was the fall-off in egg production across the UK, a direct result of retailers not paying prices that fully reflected the cost of production at farm level,” he explained.
Reflecting on the current state of agriculture in Northern Ireland at the present time, the Ulster Bank representative confirmed that the sector is in good heart, for the most part.
According to McKervey, the level of bank debt accredited to Northern Ireland’s agricultural sectors had fallen from £1.05 billon to £965 million as 2022 progressed, a drop of £88 million.
However, during the same period, the monies in farming accounts had risen from £584 million to £614 million, an increase of £30 million.
“Falling debt levels, in tandem with more actual monies in farmer accounts, points to an improving economic picture for agriculture as a whole,” he said.
Ulster Bank loan approvals
One other interesting economic trend that has been identified for the north’s farming sectors relates to the number of loan approvals ‘green lighted’ in 2022.
According to McKervey, this number actually fell during the second half of the year, relative to the number recorded in the first six-month period.
He attributed this trend to the impact that sharp increases in all input costs have had on farm businesses at that time.
The Ulster Bank representative confirmed that most of Northern Ireland’s farming sectors are performing well at the present time.
“Where dairy is concerned, milk prices have fallen since the beginning of the year. This is a direct response to the increase in production, particularly in Europe, that has been recorded over recent months,” he commented.
“However, there are no concerns, with regard to the continuing viability of the dairy sector. Summer months will likely see cashflow tighten, but while most focus on milk price, the key will be for how long the drop in price will last.
“And the same principle holds, where beef, sheep and poultry are concerned.”
Challenges for pig farmers
Pig farmers, however, continue to confront major economic challenges. Given the prices available over the past three years and more, some herd-owners have been amassing losses of up to £700,000 per annum.
“There is an expectation that pig farmers will come back into profit in the near future. The break-even price is around 220p/kg,” McKervey said.
“Processers are currently paying 210p/kg. 12 months ago this figure was down at 134p.
“We have pig farmers paying interest-only on loans and this will continue for some time yet. Moreover, Ulster Bank remains committee to the sector.
“Once producers get back into profit, we will aim to provide term finance to help them pay back debts that have been accrued over the past number of years,” he stated.