An increasing number of growers and farmers believe the credit crunch is hitting their business according to a National Farmers, Union (NFU) survey.

The banking study produced by the NFU found one in four members say they are at significant risk and likely to be affected by the economic climate. These figures compare to one in six farmers in December 2008.

However, the NFU also found that the UK’s four major banks are still supporting the industry through lending and are taking on the same proportion of new business, although other smaller banks are lending less.

The NFU survey found that 36 per cent of the farmers and growers it questioned had approached a lender for a business overdraft facility, with 78 per cent accepting the overdraft that was offered. Overall, the results show many producers underestimated how significant credit problems would be to their business in 2008 and that the terms and conditions as well as interest rates are becoming more onerous in 2009.

Meanwhile, a typical farmer can expect to pay less than five per cent interest on new overdrafts and loans, while one in seven are paying over eight per cent. One in three producers think that the terms and conditions of their loan or overdraft are very poor, although the majority appear to be satisfied with the terms offered.

Cereal farmers and owner-occupiers appear to be the only ones whose perceptions of risk have been unaffected. The number of farmers outside these categories reporting credit as a high risk has doubled.

NFU economist James Edwards compiled the results from the survey. He said: “The banking sector is still taking a relatively favourable line in terms of the availability of lending to farmers, although it is clear that there has been a shift in both the rates and terms offered to farmers and growers. With major capital costs looming to meet new environmental… rules, there is every risk that credit could be a major issue for many producers.

“It is important for our work that we provide an accurate and informed picture about the state of agricultural lending during the credit crunch. The NFU will continue to keep a watchful eye on the credit conditions and seek to ensure that lending continues through the year.”

The NFU’s survey was carried out between May 12 and June 12 2009. Some 179 farmers completed the survey questionnaire online.

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