There's little we can do to help struggling farmers, says top banker... they might want to consider selling their tractors
Dairy farmers already struggling because of the milk price crisis have been warned that they are facing higher tax bills next year.
A leading banker has warned of tougher times ahead and said farmers will have to consider whether they "really need that expensive tractor sitting in the yard at £80,000".
Although milk prices are currently well below the cost of production, prices in early 2014 were high and that will be reflected in higher tax bills next year.
However, with a poor euro exchange rate, farmers are set to receive a much lower Single Farm Payment in December this year, adding further misery to their accounts.
William Thompson, head of agriculture at Bank of Ireland, said the outlook for farming is set to remain volatile with no improvement in prices until at least mid 2016.
Mr Thompson said: "Farmers should prepare for higher tax bills next year as milk prices back in early 2014 were higher.
"That is going to put extra financial strain on farmers who are already suffering low milk prices.
"A poor euro exchange rate also means farmers will receive a lower Single Farm Payment this year which also cuts their liquid cash availability."
Latest figures from the four main banks in Northern Ireland suggest they have collectively invested £760m in agriculture at the end of 2014.
The Bank of Ireland currently holds 11% market share in the agricultural industry lending and has invested over £200m in the agriculture and the agri-food supply industry over the past two years.
Although the bank says it has not "pushed the emergency button" just yet with regard to dairy farmers, it did say that it has under 10 farmers that they are concerned about.
"There is actually very little a bank can really do to help farmers," said Mr Thompson. "We can restructure debts and extend overdraft facilities but the onus is on farmers to pay back their borrowings.
"We urge farmers to sit down and make business plans and include price volatility in these plans to help them in the future.
"Some farmers may not even realise the extent of their problems and continue to milk cows as that is all they know how to do.
"They need to look at their expenses and whether they really need that expensive tractor sitting in the yard at £80,000.
"A combination of increased global supply, a weak euro, a reduction in exports to China, an extended Russian import ban and the abolition of EU milk quotas have all resulted in significant downward pressure on farm gate returns for many farmers.
"The importance of business planning, tax planning and reinvestment of farm profits over a three to five year period is vital to ensuring the long term viability of all farm businesses.
"Looking ahead, the short term outlook remains challenging for a number of sub-sectors, particularly milk producers, however as per historic market trends, we remain optimistic about the medium to long term," said Mr Thompson.
Mr Thompson added that a high number of dairy farmers also operate poultry units and it is the poultry that is carrying the farm through at the moment.