Farmers’ business reputation is suffering due to
RECENTLY I was in company where most of the people present were non-farmers. While in conversation I mentioned that I work with farmers as an agricultural consultant and land agent — to my surprise I received the following reply: “Wow, how do you make a living at that, aren’t farmers very poor to pay? ” To say I was taken aback was an understatement, but it has since caused me to ref lect on why farmers have this reputation and what we can do in the industry to make it better.
Farming is different to most other businesses — farmers are often described as asset rich and cash poor. The average 80ac farmer probably has over €1m in assets if you add the value of land, dwelling house, livestock, machinery, shares and BPS Entitlements. Combine this with the fact Irish farmers have very little bank debt and they certainly are asset rich. The cash-poor element can be explained by the fact that average farm incomes are in the region of €26,000 per annum. If incomes are so poor, why do farmers get so much trade credit?
In today’s economy, small and medium sized enterprises (SMEs) get little or no credit from suppliers. If you want your photocopier repaired in a professional service business, you pay upfront, yet if a farmer wants his water pump fixed, all it takes is one phone call for the repair man to call and payment can be settled up at a later date, no questions asked.
The reason for this difference comes right back to the fact that farmers are asset rich — if the farmer in question does not pay the invoice for the water pump, the repair man knows the farmer has plenty of assets and he can pursue his debt through the courts knowing he will eventually get his money. Whereas the SME is most likely trading through a limited company, which may or may not have significant assets, therefore it’s safer to get paid in advance.
In my 30 years’ experience dealing with farmers, over 90pc are excellent payers and no different to any SME, but then there are those who abuse the system. It is said that bad news travels much faster than good news and unfortunately this is true for farmers who are bad to pay, and I believe this minority are the reason all farmers are tarred with the reputation.
Those who suffer most are agricultural contractors — the lucky ones are paid going out the gate, the majority are paid in instalments after the job is done, with the traditional deadline of having the bill cleared by Christmas. The warning signs go up if this deadline is missed and it becomes a worrying situation when next year’s silage time approaches without payment. Some contractors refuse to cut the next year’s silage unless they are paid, causing a stand-off which can go either way.
Ending up in the courts is often a fruitless exercise, with the contractor getting a judgement against the farmer’s land which is of no use to the contractor when trying to pay for finance on very expensive machines. It may work if a site is being sold or land being transferred to the next generation, but