Farmers owe contractors an estimated €12m in outstanding debt, according to a survey conducted by the Association of Farm and Forestry Contractors in Ireland (FCI).

This is based on its members reporting an average €35,000 in unpaid bills from their farmer customers. “For many contractors there is no interest applied to this debt, some of which is now more than 12 months old,” said FCI chair Richard White.

Contractors, however, need to finance this debt themselves and the FCI puts this cost at between €730,000 and €1.2m annually depending on the type of credit used. “We are contractors, not bankers,” said White.

National Farm Survey

The National Farm Survey published by Teagasc on Wednesday confirmed the growth in farm debt. One in three Irish farms have business borrowings.

While on-farm investment fell by €100m last year, the average debt on those farms rose by €2,000 to €63,764.

This means that farmers borrowed more just to make ends meet, while investing less money in productive assets such as buildings, machinery or livestock.

At the same time, the average farm income fell by €2,200 last year under pressure from poor commodity prices.

This has pushed the burden of debt for farms with business borrowings up from a multiple of 1.5 times their annual income to 1.8.

Dairy farmers are those most exposed to debt and Teagasc forecasts that their profitability will be restored this year, but the FCI remains concerned at the high level of contractor debt well into the milk price recovery.

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Full coverage: National Farm Survey