Weather dampens cash flows for farmers

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Farmers heading into winter were yesterday advised to check out their cash flows, with warnings of some severe challenges to their planned expenditure.

Jimmy McLean, head of agricultural services at RBS, said that, while this time of year was traditionally a low point in the borrowing calendar, the bank had concerns for later in the winter.

This latest announcement from the bank follows an unexpected rise of 10 per cent in bank borrowing in September as farmers coped with the late harvest and consequential late cheques from sales of grain.

Looking forward to the spring of 2013, McLean warned: “We are starting to receive early warnings from our customers about possible cash-flow issues, which is not surprising since this year has been one of the toughest years for UK farming, with reduced yields, additional costs and delayed harvest income.

“This is likely to put more pressure on cash flow through the winter and into next year. This will be compounded in December when the majority of farmers will receive a single farm payment which, for most, will be down around 8 per cent on last year because of a shift in currency valuations.

“For those who require additional borrowing as a result of the difficult conditions, it is always better to approach your bank sooner rather than later. In the past few weeks and months we have been supporting agriculture businesses which are facing cash-flow issues due to the wet weather, and we will continue to do so.

“Agriculture remains an important sector to the bank and we will be keen to assist, where we can.”

McLean said that he had already spoken to dairy farmers who were concerned about the quality of the silage they had been able to make in the past summer. “The problem is not bulk, it is poor quality,” he said. “The only solution for that is buying in protein and that in today’s market will be very costly.”

He was also aware of cereal growers who had followed their usual custom and forward contracted sales of their grain.

He added that he had not heard of any farmer failing to meet his contract tonnage although some had failed to meet the required quality standards.

Commenting on where the financial problems might lie, he said that the summer rainfall which was the major influence in farming had not affected all parts of Scotland equally.

“It has been much worse in the south and east where all the summer months saw well above average rainfall figures,” he said. “Further north and west had not been so badly affected.”