Big change in interest rates ‘unlikely before harvest’

A significant drop in interest rates is unlikely before harvest, says a leading agricultural banker.

HSBC deputy head of agriculture Grace O’Dwyer made the forecast as she addressed the Suffolk Farming Conference. More than 400 farmers and industry experts attended the event on 29 February at Trinity Park, Ipswich.

“Most farming businesses have a high dependency on borrowing relative to the size of their business,” said Ms O’Dwyer.

“It’s a really key part of business planning. It may be working capital – and as you will all be aware, the demands on working capital, usually through overdrafts, has increased massively in recent years.”

The need for multi-generational farming businesses to leverage assets and invest for the future was important, added Ms O’Dwyer. But a big change in interest rates was unlikely for some months.

“When I talk to our economists, their perspective at the moment is maybe a little bit of a plateau. But with the inflationary pressures we still have within the economy, it’s very likely we won’t see any real changes in interest rates this side of harvest.”

That said, banks were continue to support farmers. Lenders with agricultural expertise understood there were good and bad years in farming – and a host of external factors affecting profitability.

As well as unrest and conflict, such as the war in Ukraine, a lot of factors were outside the control of farming businesses.

They included volatile prices, uncertain weather and animal disease.

This “churn and change” made it important for the supply chain to work together, said Ms O’Dwyer.

Technology was part of the answer when it came to securing a profit amid so much uncertainty but often it required a huge investment.

“Whether it’s driving regenerative farming – or whether it’s looking to produce as much as you can with fewer inputs – driving economic sustainability within your farming system and understanding what that means going forward will be key.”

Farming conference is big success

More than 400 delegates keen to see how their farm businesses can “thrive, not just survive” attended the 2024 Suffolk Farming Conference.

The one-day event was a collaboration between Fram Farmers, Scrutton Bland and the Suffolk Agricultural Association. It brought 260 delegates to Trinity Park, Ipswich, on Thursday, 29 February, with a further 160 attending online.

Keynote speaker was Henry Dimbleby, co-founder and former chief executive of Leon restaurants. He talked about changes in the food system and discussed recommendations for the future of food production.

A panel discussion on finance with questions from the audience then followed with HSBC deputy head of agriculture Grace O’Dwyer, ADM chief exconomist Marc Otswald and Scrutton Bland tax expert Paul Harris.

Two further panel discussions followed. Stephen Jacob, chief executive of the Institute of Agriculture & Horticulture hosted a session on talent and training. Belinda Clarke from Agri-Tech E then hosted a session on digital innovations.

As well as giving much food for thought on a range of issues, the event also raised £1036 for YANA – the You Are Not Alone mental wellbeing charity for farms and other people in rural communities.