Farm borrowing reaches record £17.8 billion

A new report from the National Farmers Union (NFU) has shown that farm borrowing has risen to a new record of £17.8 billion in the year to the end of June.

This is a 6.4 per cent increase and marks a rise of £208 million just in the month of June, which compares with a £163 million during the same period in the previous year.

Farmers used 72 per cent of the facilities available to them at the end of June, the same proportion as a year ago.

The latest figures mark a rise of almost 90 per cent in farm borrowing over the last ten years, compared with a 176 per cent rise in UK farmland prices over the same period.

The Bank of England‘s monetary policy recently announced a drop in the base rate to 0.25 per cent from 0.5 per cent, effectively making borrowing cheaper. However, how quickly this is passed on to consumers is not clear.

However, a fall in rates could further lower the value of the pound, possibly boosting farmgate prices for farm produce that relies heavily on exports, such as cereals and lamb – reducing the appetite for borrowing.

NFU economist Anand Dossa said the impact of low commodity prices was likely to resonate for a further 12 months, while a lower sterling value had helped boost export prices, some sectors such as dairy and cereals were looking at the second year of significant profit reductions.