News & EventsWho? What? Where? Why? Read all about it here!

Get the Latest

Latest

Downward Pressure on Farmers Must Stop

Colin ClarkThe Scottish Government figures on Scottish Farm debt which were published in the autumn were disappointing. Loans to Scottish farms rose by £73 million, a 4% increase in the last year and the sixth consecutive annual increase in debt bringing the total amount due to £2.03 billon the highest since the late 1980’s. The vast majority of that debt is owed not surprisingly by owner occupiers.  

The Banks have plenty of security given the currently high values of most land and are still willing to lend but not necessarily to every customer.  The affordability of the business to make the repayments is often more of a priority for the lender than asset value. Some of our clients have received an unwelcome surprise when applications for very modest loans compared to the value of the farm have been refused because they are seen to be unaffordable given the current low commodity prices.

The continuing increase in debt is of concern, especially when combined with low prices across the board for agricultural commodities and farmers would certainly welcome a good year and probably need several good years in a row to rebuild their income and balance sheets. 

Given that interest rates are at a historic low and will have to increase at some stage servicing the debt may cause a problem for some when interest rates inevitably rise. It would certainly cause a problem if interest rates rose to the levels which they were at in the 1980s and 90s when interest rates of 10% or more were not unusual.    

While borrowing to make up for reduced income can be justified for a while, it is not something that is sensible in the medium or long term. Investment returns from capital projects also have to be looked at very carefully, particularly when commodity prices are low. Some commentators are speculating that agricultural products are likely to decrease in price over the next 10 years which is not an appealing prospect especially if combined with a rise in interest rates.  

The response to static or declining demand and lower prices is to look for ways to increase efficiency, increase yields and reduce input costs. This may be achieved by economies of scale and the historic trend for fewer larger farms is likely to accelerate in the future.

Many in the industry argue that one way of increasing efficiency are GM crops. A lot of controversy was caused by the Scottish Government’s refusal to allow GM crops to be grown in Scotland.

The danger is that our farmers are competing in a global market against other farmers who can produce food more cheaply by growing GM crops but ours find themselves in a position where they don’t get a premium for their non GM crops.

It is of course essential that farmers produce a product that the public are willing to buy.  However, most people don’t fully understand the pros and cons of GM crops. It is incumbent on the industry and politicians to encourage sensible mature debate without the use of emotive words such as “Frankenstein Foods” to ensure that a rational decision on GM crops can be reached.  

If there is not a level playing field the downward pressure on Scottish farming income is likely to continue. This will have a negative impact not just on farmers but on suppliers and ancillary trades which is not good for Scotland’s economy.

We’ve seen the drastic impact falling oil prices have had in that sector and it is in no one’s interests if we have a similar and sustained downturn in the farming sector.

GET IN TOUCH


Not sure where to start? Why not just give us a call today on
0131 624 6820 for Edinburgh or 01334 475001 for Fife to discuss your needs.

All fields marked with * are needed

GET IN TOUCH

Want to work with a local, friendly company? Then find your nearest Pagan Osborne office to you below. However, we also work with clients throughout the UK so you can call any of our numbers and our helpful reception staff will be happy to forward on your call to the most appropriate expert to suit your needs.

Edinburgh
Clarendon House
116 George Street
Edinburgh
EH2 4LH Call Us
Tel: 0131 624 6820
Fax: 0131 220 1612
2 Comiston Road
Morningside
Edinburgh
EH10 5QE Call Us
Tel: 0131 539 3333
Fax: 0131 538 7204
St Andrews
106 South Street
St Andrews
Fife
KY16 9QD Call Us
Tel: 01334 475001
Fax: 01334 476322
Cupar
12 St Catherine Street
Cupar
Fife
KY15 4HH Call Us
Tel: 01334 653777
Fax: 01334 655063
1 Crossgate
Cupar
Fife
KY15 5HA Call Us
Tel: 01334 656525
Fax: 01334 654119
Anstruther
Pagan Osborne
5a Shore Street
Anstruther
Fife
KY10 3EA Call Us
Tel: 01333 310703
Fax: 01333 311918

CALL BACK SERVICE

Got a question? Fill in your details below and we'll give you
a call back on the date and time you have chosen.