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Author: Ellwood, Steve1

There will be much to talk about at this year's Dairy Event, of which we are delighted to be principal sponsor once again.

Continuing uncertainty over milk prices, the need for on-farm investment to ensure efficiency, plus finding good quality labour are just a few of the topics we expect to discuss with visitors.

What is apparent to the team of HSBC Agriculture banking managers is the gap between top performers and those struggling is widening. There are many dairy farmers expanding, but they are almost all in the top 25% group.

Whatever their position in the competitiveness league table, all dairy farmers are looking forward to receiving their first single farm payment. At almost £15,000 for a 1m litre unit, rising to more than £20,000 in 2006/07, the payment will come as welcome boost to cash-flow.

The likely date of receipt is still unknown, but it seems prudent to assume it will be in the second quarter of 2006. This may place some cash flows under pressure and those who anticipate problems should talk to their bank manager sooner rather than later. We expect to able to support requests for bridge-over facilities in virtually all cases.

As it is possible to take single payment in euros, although the deadline for this has passed for 2005/06, there has been significant comment on the benefits of Euro loans. At first the case seems clear cut with euro base rates (2%) being less than half sterling rates. But future changes in exchange rates and trends in euro/sterling borrowing rates could reduce or reverse the benefits.

The HSBC team will be pleased to talk over these or any other issues at the Dairy Event. Its new stand location is on Avenue M.

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By Steve Ellwood, Head of Agriculture, HSBC Bank