May 29th, 2009

Cahill says "encouraging signs" that banks appreciate dairy farmers' dilemma

"As part of ICMSA's commitment to working on real solutions and in light of analysis that indicates no immediate upward turn in milk price I decided to convene a meeting with representative from Banks, Co-ops, Agricultural Advisory and Consultancy Stakeholders last Wednesday. We have got to address the facts around credit, loans and possible widespread rescheduling or deferral. The industry is in crisis and ICMSA is determined to fact the facts around that reality", commented Mr Cahill, who said that he was pleased that his perception of the present situation and what might emerge over the next month was shared by the banks.

"Overall there was broad consensus about what needs to be done and there are encouraging signs that the lending institutions appreciate the crisis being experienced by their dairy farmer customers. However, I believe that the banks will have to take a long-term view on the question of current loan repayments and cash flow. While the two are related they are separate matters and they need to be addressed with that fact in mind. This is the first year where most dairy farmers will have a negative cash flow and huge numbers will definitely not be able to meet loan repayments in full. Indeed, a substantial number of dairy farmers will not be able to meet interest in the coming months and will require extra working capital to cover the cost increases over the last six months. Currently farmers are being charged about 8 per cent for overdrafts but there is an additional penal extra 12 per cent surcharge giving a total of 20 per cent. This is compounding the difficulty and my proposal to the bank is that there should be a moratorium of this surcharging for at least a month to allow farmers to make proposals to the bank to work their way through the present difficulties by way of a proper and fair restructuring", said the ICMSA President.

"Both Teagasc and the consultants have the expertise to draw up these plans for farmers and I would strongly advise any farmer who needs to restructure loans to get in contact with Teagasc or his consultant and to draw up plans based on projected income and expenditure over the next 12 months. This is vital to secure the lowest interest rate possible and avoid surcharges", continued Mr Cahill.

The meeting agreed to jointly produce an information sheet, which will be distributed to all dairy farmers within the next two weeks.

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