THERE was a slow-down in the total lending from banks to Scottish agriculture over the past year, according to statistics from a survey of the main banks and other lending institutions released by the chief statistician.
Outstanding debts to Scottish farms rose by one per cent (£22 million) in the year to May 31 2018. Total outstanding lending to the agricultural sector amounted to £2.34 billion. Accounting for inflation, this was a decrease of 0.6 per cent since May 2017.
Lending can be a sign of confidence in the industry and the slow-down this year might suggest a sign of hesitation in making investment decisions. This could be caused by overall weak growth in the economy, or concerns that interest rates may rise in the future.
In addition to bank lending, farms have an estimated £1.2bn of debt related to hire purchase, leasing and other sources. An estimated 51 per cent of total lending are long term debts, a percentage that has been slowly increasing over time. This growth in debt is likely due to restructuring of informal debts to more sustainable repayment loans. Total bank held debts are roughly the equivalent of 10 per cent of assets, a relatively low debt ratio, due to high value assets.
The data in this publication reflects the overall UK picture. Figures from the Bank of England showed that, by May 2018, the UK "Agriculture, hunting and forestry sector" had an outstanding debt of £18.75bn, rising by one per cent over the past year. However, as in Scotland this increase was smaller than in previous years.
NFU Scotland director of policy and member services Jonnie Hall said: "The increased levels of debt and borrowing taken on by Scottish agriculture in recent years are less likely to be about farm businesses funding much-needed investment and more about farms and crofts having to take on greater levels of borrowing as working capital to keep businesses ticking over during increasingly uncertain and challenging times. That is unsustainable in the long run."
Mr Hall went on: "These borrowing figures simply underline the value and importance of on-going support to active producers and that determining the right package of post-Brexit policies and funding of future support for Scottish agriculture will be critical."
Market round-up
Messrs Craig Wilson Ltd sold 10 prime heifers at Ayr on Tuesday to a top of 229p per kg and an average of 219.1p, while a prime bullock fetched 236p.
In the rough ring 121 beef cows sold to 176.2p and averaged 118.9p, while 105 dairy cows peaked at 144.8p and levelled at 93.6p.
A much better show of 10 dairy cattle sold to £1,850 for a Holstein Friesian heifer and averaged £1,598.
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