2015-03-20  

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Banks Must Work Collaboratively with Farmers

UK food and farming has huge potential to be more competitive on a global scale. But that can only happen with strong collaboration between the banks, the farming industry and government.

This was the message from Tim Mordan, deputy director at Defra, speaking
at the Lloyds Bank Agriculture Steering Group. He stressed that food and farming was very important to the UK economy, and banks had a significant role to play in ensuring the industry remained strong in both good times and bad.

Andrew Naylor

Andrew Naylor

“Make no mistake, agriculture is a significant principal industry for the UK,” he said. “Worth around £9 billion, it employs over 450,000 people and accounts for around 70% of land use.

“Furthermore, food and drink is the UK’s biggest manufacturing sector; the entire food chain, from field to fork, contributes over £100 billion a year to our economy and employs one in eight people.”

But Mr Mordan said that while a growing global population and rising income levels presented significant opportunities, Defra recognised that over the past few years farmers had been hampered by both extreme weather and extreme market volatility.

“This is why we have been working closely with the main high street banks to identify ‘hotspots’ in the industry and explore how farmers can be supported in overcoming these challenges,” he explained.

“For example, two years ago we worked with Lloyds Bank and other banks to support those livestock farmers hit by the late spring snow and blizzards. This time last year we were looking at how we could help those farmers in the Somerset Levels and elsewhere hit by the severe floods.

“And currently, Defra ministers have been keen for the banks to be involved in discussions about helping dairy farmers struggling with low prices. We are particularly watching those emerging from the end of their contract periods this month into an oversupplied market.”

Andrew Naylor, head of Lloyds Bank Agriculture, echoed Mr Mordan’s comments, and added he was pleased to report that despite the current climate, medium term prospects remained good.

“While our relationship managers are reporting back particularly tough market conditions for many customers at the moment, there is underlying optimism and demand is strong.”

He explained that as a ‘through-the-cycle’ lender, Lloyds Bank did see farming at its best and worst profitability. “But this is part of the deal.

Banks working with farmers should be able to understand and expect huge variations in profit, and be agile enough to adapt their support through the bad times and the good.

“And on the flipside, farmers should be looking for a partnership with their bank rather than just a contractual agreement. An ability to grasp the details of each individual business – its supply chain, costs of production and cash flow – is very important, but many producers also need a sounding board for ideas and help to help bring them to fruition.”

Lloyds Bank

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