There is strong lending activity in the agricultural sector, according to statistics presented by BOI's head of agriculture Seán Farrell at a hearing held by the Joint Oireachtas Commitee on Agriculture on Tuesday 24 November.

Along with lending a total of €580m to farmers in 2015, an increase of 13% on 2014, the bank has also approved 93% of agri-credit applications. It adds that over 60% of all agriculture-related business lending originates in rurally based branches, something which illustrates the importance of the agricultural sector to the bank.

Meanwhile, agriculture is the largest standalone sector within BOI's Business Banking Portfolio, comprising 10% of overall permissions (including unutilised overdrafts) and year to date represents 23% of all front-book lending to its business customers.

Banker optimistic on prices

Overall Farrell was optimistic about the state of affairs with regard to price volatility, saying BOI's view is that the outlook for agricultural commodities is positive and that prices will increase over the next five to 10 years. He added, however, that this increase "will not be linear and there will be peaks and troughs similar to what is being experienced now by the dairy sector."

AIB and Ulster Bank also presented at the hearing.

Ken Burke of AIB said demand for credit from farmers, in particular dairy farmers, has remained "strong" throughout much of 2015.

But he added that AIB has seen "some slackening in demand" in recent months. He attributes this to tax bills falling due, farmers postponing non-essential investment in preparation for a leaner income year in 2016 and waits for grant approval under TAMS II.

Less indebted

Burke said AIB recognises that Irish dairy farmers are "much less indebted" than some of their European or southern hemisphere counterparts.

"However, Irish farmers still experience financial pressure, perhaps just not as severe or indeed as quickly as farmers elsewhere," he said.

The bank therefore reiterated its message for farmers of ‘Better Before Bigger’, saying investment in expansion should only be undertaken in "a very planned manner when existing efficiencies have been maximised."