The farm finance conundrum

Professor Alan Matthews writes: 'DG AGRI EU Agriculture and Food has published a news item 'Access to finance: unlocking investment for Europe’s next generation of farmers' which states that affordable credit is one of the biggest barriers to entering agriculture for younger farmers.

I am puzzled by some of the inconsistencies in the item. For example, it states that across Europe young farmers tend to operate smaller farms. This is factually incorrect, as is documented in the DG AGRI Analytical Brief No. 10 on young farmers in EU agriculture which makes clear that young farmers tend to operate larger farms than the average (an average of 26 ha compared to an average of 16 ha for other farmers) and that on average they are also bigger in economic size terms.

The news item also highlights that young farmers have higher debt ratios than older generations, a fact confirmed in the Analytical Brief. But this does not support the view that young farmers are necessarily shut out of the credit market - otherwise how would they become more indebted? 

I do not dispute that young farmers due to a lack of a credit history may find it difficult to obtain credit finance, and no doubt all businesses would like to see easier access to credit, but does the evidence suggest that young farmers have greater difficulty than other farmers? Of course, we all want to see more young farmers in the industry, but is this focus on credit a bit of a red herring when the real issue is the large number of older farmers beyond pension age continuing to farm and to draw down CAP payments?'

 

In the distant past (1994/5) I took part in a multi-country study of farm finance, contributing the coverage of the UK and the Republic of Ireland.  (The US, Canada, France and Germany also featured). I had some fascinating interviews with bankers, government officials, accountants and farm organisations and I wish we had published more from the study (I had a very able Irish research assistant who undertook a lot of archival work on the history of farm finance in the UK and Ireland.)

The interviews reports are lodged with the Modern Records Centre at Warwick University.

If I was to summarise the findings in one sentence I would say that farmers, or at least larger scale ones, had some pretty good financial deals (and tax concessions).

It is, of course, hard for younger farmers to break in, but that has much to do with older farmers clinging on, as I know from my own family.