Prices for most agricultural commodities have fallen over the past 18 months and continue to remain under pressure. Inevitably, this has created financial challenges for some farming businesses.
In addition, it has come to our attention that the agri-environment payments expected to be made to farmers this autumn will be delayed.
Not only that, but the introduction of a new BPS may have an impact on timeliness of payments, leading to further pressure on farm finances.
However, the RPA has pledged to ‘start to make full BPS payments in December and make the vast majority by the end of January 2016’. On the NFU’s part, we remain focused, working with government to ensure timely payments to our farmer members.
The NFU has worked closely with the banking industry to make them aware of the current situation and the impact this is having on farmers’ profitability, margins and borrowing requirements.In light of the recent announcement on the agri-environment payments, NFU President Meurig Raymond wrote to all agricultural lenders asking for their continued support as cash flow will become increasingly critical in the months ahead.
On the member front, we continue to monitor the wider banking dynamics and provide timely information. We have recently produced a briefing to give an update and shed light on the current lending environment and to highlight what members should consider when looking at their lending facilities over the next few months. The member-only briefing can be viewed here (you'll need to log-in first).
This document is to be used for general guidance only and specific issues and changes to lending facilities should be discussed with the appropriate professional before implementing. Nonetheless, building and maintaining communications with lenders in a shifting business environment will remain critical.
In terms of support from the banks, RBS and NatWest Group has announced fee free loans to bridge the gap in the event of late payment. The bridging loan, available to existing customers, will allow farming businesses to borrow a proportion of the amount they expect to receive from the BPS until the official payment comes through. Loan agreements will be put in place from mid-September with the money being available in the customer’s account from the first week of December.
Likewise, Lloyds banks is the latest financial institution to commit to providing a support package for farmers. It has launched £500m fund to help farmers facing potential delays. Lloyds Banking Group is writing to its farming customers to inform them that if they receive their cheques late, they can apply to the bank for a free overdraft to help them with their cash flow.