March 14, 2011

UK farm debts show increase

UK farm businesses incurred debts totalling almost GBP11.6 billion (US$18.72 billion) at the end of last year, up by 3.7% as compared to a year earlier.

Bank of England figures for the month of January this year document a similar annual increase, bringing total debts to GBP11.65 billion (US$18.72 billion).

The percentage of available credit being used almost hit 80% in both 2009 and 2010, although the most recent months show a small rise in that measure.

The rise in borrowing was expected, said HSBC's head of agriculture, Allan Wilkinson. As well as having a larger requirement for working capital, farming enterprises were investing in land and grain storage, he said.

"You need to make sure you see a margin between cost of production and forward prices. While output prices look good, wheat production costs could easily be GBP140/tonne (US$225)," he said.

Vulnerability to possibly large price changes required careful appraisal of cash needs, good budgeting and management information, said Clydesdale and Yorkshire Bank's head of agribusiness, James O'Mahony.

The dairy industry was especially under pressure and some new requests for larger facilities were substantially over the average rise of 3.7%.