Low or zero interest rates could spur on farm investments

Is now the time to buy? With money as cheap as it has been for the past decade is now the time to invest in your farm. This article looks at key areas in which investments could be worth looking into as well as some examples of businesses that have already invested well into farm diversification ideas.

Record low or negative interest rates could see more farmers investing in new projects such as diversifications, expansion or kit that will help make them more efficient and reduce their carbon emissions.

Nick Evans, co-founder and managing director of new specialist agricultural bank Oxbury, said the Bank of England’s warning that banks should prepare for negative interest rates to help the economy rebound from the coronavirus crisis could help bring investment plans to fruition.

Mr Evans said: “The Bank of England has predicted the economy to grow in quarter two at a rate of knots and we are hugely optimistic about the outlook for farming.

“Farmers, whether they have cash or a cash component are looking to invest because their cash is not making any money in the bank, or close to nothing.”

Mr Evans said diversification was a key area of investment, with clients looking particularly at residential, tourism and storage.

Private purchases towards farm diversifcation

Farm diversification and expansion was also an ‘accelerating’ trend, with the bank funding private purchases of land parcels of about 50-100 acres.

He said investment to boost efficiency and productivity on the dairy side was another key area, with some dairies choosing to extend cow housing and purchase more cows.

Slurry handling and storage facilities would continue to see growth, especially in Wales where the Welsh Government plans to class the entire country as a nitrate vulnerable zone (NVZ) from April 1.

Carbon positive initiatives which help to reduce a farm’s carbon footprint, including investment in renewable energy was another trend, as was the consolidation of loans, enabling businesses to get all their debt into one manageable sum.

Succession planning

“Financing succession planning is another key area. This provides a pot of cash for investment, so that the older generation have funds to enjoy retirement, leaving sons or daughters to take over the farming. ” said Mr Evans.

“Often farmers do not have a pension pot so they cannot get out of the business. Our loans allow those wishing to retire to draw down a lump sum which can then be paid back over 25 years by the younger generation who takes responsibility for the loan.”

While offering long term loans from 25,000 to £10 million, the bank also offers credit on inputs such as feed, seed, ag-chems and fertilisers.

Farmers can visit oxbury.com or speak to their input supplier.

Article taken from: Farmer Guardian

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