The agri advisor team at AIB has said that they noticed an “increased new money demand” for the agricultural sector.
AIB loaned the agricultural sector of non-property businesses a total of €1.8 billion so far this year, according to its interim report for the first six months of 2023.
The non-property business portfolio includes small and medium enterprises (SMEs). It also includes larger corporate and institutional borrowers which are impacted by global economic conditions.
This figure was an increase from the second half of 2022, when the sector received €1.6 billion.
The advisor team described 2022 as a “very mixed year” for the sector, with the ending of Covid-19 restrictions, the Russian invasion of Ukraine and the resulting higher input costs.
“Higher output prices particularly for dairy and tillage farmers, were sufficient to offset the higher input costs, but incomes on cattle rearing, sheep and pig farms fell in 2022,” the agri advisor team stated.
Finance demand
According to the advisor team, investment activity so far this year stemmed from changes to policy and regulations in 2022.
This included the emission reduction target of 25% by 2030 under the Climate Action Plan.
It also included the changes to direct payments under the new Common Agricultural Policy (CAP) programme, and the review of the Nitrates Action Programme.
Another common reason for higher rates of lending came from farmers looking to invest in solar opportunities.
“We are having a lot of conversations with customers that are looking at the potential of solar panels on their farm holdings.
“A catalyst for this investment is the announcement of the 60% grant funding under the Solar Capital Investment Scheme (SCIS) as part of the Targeted Agriculture Modernisation Schemes,” the advisory team told Agriland.
AIB outlook
The main challenges for the agricultural sector this year include adopting sustainability and meeting emission targets, according to the report.
It states that the transition of activities to more “climate friendly and sustainable methods” will continue to be a key challenge as the year continues.
The team said sustainability is “a key focus” for its investment in agriculture.
“All our new lending is based on sustainable and viable business plans that incorporate financial, social and environmental considerations,” the agri advisor team stated.