Farm debts put rural economy in real danger

Levels of farm borrowing have almost doubled in the past decade, with almost a fifth of farms - some 17 per cent - facing major financial problems as they struggle to pay off short-term debt, research commissioned by the charity show.

Another one-fifth of all farms are operating at a loss, the charity said, and that was before family labour and capital costs were deducted from earnings.

The sectors worst affected by sharp drops in incomes are cereals, milk and pigs. And it is leaving farmers with little option but to look elsewhere to ease their cash flow problems. The charity reports that half of UK farms are no longer making a living from farming alone.

The wider rural economy is feeling the strain as a result of the hardship being experienced by farmers, according to Lord Curry, chairman of The Prince’s Countryside Fund. He said less cash is filtering through to other businesses that rely on farmers’ spending powers and the result is less work, falling incomes and potential staff redundancies.

He said: “The research presents a very bleak picture not only for farmers; but also for the wider rural economy. Volatile commodity markets are not just affecting farmers; decreased cash flow is affecting the industry as a whole, from vets to feed and machinery suppliers to auction marts. The full extent of the crisis is not yet fully understood.

“As a result we are witnessing a trend towards increased and sometimes risky borrowing by farmers.”

Farm profitability at lowest level for eight years

The Prince’s Countryside Fund commissioned The Andersons Centre to gain a greater understanding of the cash flow pressures facing farmers and their impact on the wider agricultural sector in March. Its findings are the result of data analysis and telephone interviews with 21 agricultural businesses.

Lord Curry said the findings suggest the situation is not about to get any better.

“Distressingly the outlook does not look set to change in the short-term and the degree of uncertainty about the future is affecting everyone,” he said.

“This in turn is causing suppliers to consider making job redundancies and think about coming out of agriculture.”

He said it is essential that farmers seek professional advice and support to cope with the difficulties they are facing.

Lord Curry added: “Confidence, better cooperation and communication throughout the supply chain are needed if they are to survive.”

The findings came as new government figures showed farm profitability had fallen by 29 per cent in the last year - with low farm gate prices, flooding damage and delayed European support payments taking a toll.

Gail Soutar, chief economist at the National Farmers’ Union, said its own research showed farmers were at a low ebb.

She said: “The latest NFU farmer confidence survey of its members has this week also confirmed that both short and medium-term confidence has fallen to the lowest level in six years.

“That confidence impacts investment levels in the agri-food supply chain, and indirectly on jobs and economic growth.”

Farm profitability at lowest level for eight years