Farm Business & Inputs Council Report June 2021
Farm Business Report
Activity since last National Council
– IFA met with Colin Hunt (CEO), Donal Whelton (Head of Agri) and Conor O’Donovan (Head of Financial Services Group)
– AIB wants to support customers on their journey towards sustainability: AIB will work in partnership with IFA on owning and influencing the green narrative
– The usual reasons were given for high interest rates: capital ratios, cost of regulation, level of risk
– Plus, Irish banks do not charge loan administrative and arrangement fees on top of interest rate unlike their European counterparts
– AIB strongly supports SBCI schemes but will not be replicating such schemes despite the strong evidence of low default levels
– AIB places an emphasis on sustainable communities and therefore will not be closing any rural branches
– Regarding Non-Performing Loans:
– AIB always prefers restructures on a case-by-case basis to loan sales
– Where there is no engagement, AIB has no choice but to sell a loan
– AIB will work with IFA on NPLs by establishing the connection with its Financial Services Group
– IFA met with Patrick Farrell and Mags Brennan from PTSB.
– PTSB is keen to grow its agricultural lending and intends to be an active participant in SBCI schemes.
– PTSB wants to support Irish farmers as they adapt to increased environmental ambition and transition towards climate neutrality. PTSB views sustainability as sustainable cash flows on a farm over several years. Repayment capacity is the bank’s key priority when approving lending.
– PTSB is in talks with Ulster Bank over purchasing its loan book. Ulster Bank’s branch network is included in the negotiations.
– Optional loan purposes at discretion of DAFM and DETE:
– Excluded loan purposes
– Borrow eligibility
– Most relevant to farmers: The business is be indirectly exposed to the UK (incl. NI), i.e., transacts products, services or raw materials with an enterprise that is directly exposed to the UK (incl. NI) equating to at least 15% of turnover.
– Primary producers across all sectors can apply once they qualify under the eligibility criteria
– Similar to the FGLS, borrowers must apply to the SBCI for an eligibility token to confirm that the borrower meets the eligibility criteria for the scheme before approaching the participating lender
– IFA met with MII requesting that all processors make EFT available to all farmers as means of payment for livestock.
– ABP is now offering the option of EFT to farmers as well as cheque.
– IFA has written to MII requesting that all processors offer EFT payments to farmers.
– IFA wrote to and met with Minister Darragh O’Brien on the issue.
– IFA’s President raised the issue with the Minister by highlighting points below:
– IFA is seeking an extension of the grace period during which the 1858 Act continues to remain in force.
– The enactment of the 2009 Act could extinguish unregistered prescriptive easements which have not been continuously used for a 12-year period, i.e. rights earned under the 1858 Act.
– Covid-19 has created barriers to registration – business and communications have been interrupted. People may not have been able to actively assert their rights of way during the public health restrictions.
– The Property Registration Authority (PRA) is experiencing a significant backlog: More than 140,000 cases on hand, i.e. 23% more cases in arrears than this time last year. It is unlikely the PRA will work through the backlog this year.
– The Law Society is recommending a 6-year extension and complete review of the 2009 Act.
– The 2009 Act will further complicate the registration process by creating additional costs and stress for farmers.
– IFA met the Financial Services Union on 30th April to discuss the Banking Forum.
– John O’Connell (Secretary General) and Brian McDowell (Head of Comms & PR) represented the FSU.
– They wish to establish a Banking Forum of all stakeholders to produce recommendations to reform the banking sector.
– Priorities for FSU include: Closure of bank branches, Pay certainty for FSU members, Health and safety, Forbearance and the Central Bank Code of Conduct needs revision.
– IFA has been invited to participate. Paschal Donohue has been invited to participate but believes doing so would present a conflict of interest.
– The Banking & Payments Federation and the banks support the Forum.
– The Irish Banking Culture Board supports the Forum. The JOC on Finance supports the Forum. Terms of Reference and full membership remains unknown.
– Access to finance at competitive rates is a priority for the IFA.
– IFA has agreed to participate in principle but needs more detail.
– The Tax Strategy Group Papers are being prepared by the Department in the 1st half of the year and these will inform the Minister for Finance’s decision on which measures are included in the Budget.
– The committee made a submission for the Department of Finance highlighting the key tax relief and measures that must be included in Budget 2022.
– It will focus on reliefs under the stamp duty code: consanguinity, consolidation, forestry, young trained farmer ceiling; CAT agricultural relief: favourite successor, solar, tax-free thresholds, forestry; and CGT reliefs: entrepreneurial, retirement.
- The Personal Insolvency (Amendment) Bill 2020 has passed through the Oireachtas and is awaiting sign off from President Higgins.
- Among other amendments to the Personal Insolvency Act, debt is no longer required to have originated prior to 2015 in order to avail of the insolvency instruments under the legislation.
- The general scheme of a more comprehensive reform Bill is expected later this year.
- IFA will lobby to ensure that greater flexibility is introduced for farm families who wish to avail of Personal Insolvency Arrangements.
- Driver Theory Test
- IFA wrote to Minister Hildegarde Naughton requesting that the Driver Theory Test be reclassified as an essential service and/or made available to essential workers through remote online testing.
- Prospective agricultural contractor employees are essential workers and have been unable able to take a Driver Theory Test.
- Remote online tests are now available using ProProctor software.
- Online capacity and in-person testing capacity will be ramped up to begin reducing the backlog.
- Close monitoring of Ulster Bank as it proceeds towards winding down its operation and the sale of its loan book.
- Reform of the Personal Insolvency Act.
- Submissions to Budget 2022.
Activity since last National Council
- The committee led a survey in May of fuel prices with the help of the Environment and Rural Affairs committees.
- There has been a significant rise in fuel prices across the country over the last 12 months.
- Fuel prices have increased by over 30% compared to this time last year, which can be attributed to the recovery in crude oil prices.
- The spot price for a barrel of crude oil collapsed to $20 at the start of the COVID-19 pandemic last year, but it has steadily returned to pre-pandemic price levels this month ($65-$70).
- This rise in fuel prices reflects the latest CSO figures on agricultural input prices which demonstrated that farmers are caught in a classic cost-price squeeze.
- The average prices quoted incl. VAT were as follows:
– White diesel – €1.31/litre
– Green diesel – €0.69/litre
– Kerosene – €0.65/litre
- There were variations of over €0.09/litre incl. VAT between the counties surveyed.
- On 1,000 litres of green diesel incl. VAT, the saving could be as high as €98.
- Allowing for outliers, there is little price variation across the country compared to this time last year. Notwithstanding that, IFA is reminding its members that it pays to shop around for fuel.
- Some suppliers indicated that purchases in larger volumes tend to work out cheaper, particularly if paying on the day.
- Purchasing groups tended to receive the keenest quotes.
- Further discounts can be secured when ordering fuel online.
- Prices of construction materials particularly steel and timber continue to increase due to a shortage of supply caused by reduced production capacity during the pandemic.