Brighter prospects justify investment, says banker
Growing political support for UK agriculture means farmers are in their strongest position for decades, claims a leading banker.
Price and input cost volatility will continue to pressure farmers, said Gareth Oakley, agriculture director for Lloyds TSB and Bank of Scotland. But greater profitability and business security beckoned for those who invest sensibly.
“Recovery in the global economy and continuing population growth will drive demand for food, leading to higher commodity prices,” Mr Oakley told a business meeting for farmers in Lincolnshire.
“In the domestic market, evidence suggests that consumers are becoming more aware of food quality and provenance. This, together with increased consumer support of UK farmers, will help to underpin premium pricing.”
Farmers should also be encouraged by the growing recognition of the importance of food security. This was resulting in greater political support for the industry, Mr Oakley said.
“With such a positive outlook, farmers should have the confidence to invest in their businesses, and – if their plans are sufficiently robust – they should expect the appropriate support from the banking sector.”
Bank of England statistics show that overall lending to agriculture increased by 6% in 2009. But these headline figures masked varying levels of support and commitment shown by different banks, Mr Oakley claimed.
“Lloyds Banking Group increased its lending to agriculture in 2009 by 17% and we expect to see further growth in 2010. This means we are lending more to agriculture than we have ever done before.”
Strong prospects for agriculture and historically low interest rates were combining to create the ideal opportunity for farmers to map out their futures and invest accordingly.
“We expect interest rates to remain at this all time low for much of 2010 with only the possibility of small increases later this year,” said Mr Oakley. “Rates may then climb slowly through 2011.
“When you consider that the average base rate for the last 35 years has been 8.5%, the fact that rates remain at 0.5% makes now a good time to borrow money and invest in your business. “
