Page last updated at 12:26 GMT, Wednesday, 5 November 2008

Farm borrowing at record levels

Combine harvester
Arable farmers had a good harvest in 2007

Farmers are borrowing money at record levels as higher dairy prices and better harvests encourage them to buy land and new machinery.

However, analysts also said that volatility in grain prices and rising fuel and fertilizer prices had increased overdraft borrowing.

Figures from the Bank of England showed that lending to the farming industry stood at 10.6bn in the third quarter.

Lloyds TSB said that the figure was an all-time high.

A good 2007 harvest and better dairy prices have encouraged farmers to reinvest in their farms by replacing old equipment or buying new land, said Paul Spencer, director for Lloyds TSB Agriculture and the Agricultural Mortgage Corporation.

"We anticipate a further increase in borrowing early next year as farmers begin to pay their tax bills based on the good profits of 2007," he said.

But he said that rising input prices, such as fuel and fertilizer, and volatile grain markets, had put farmers' cash flows under pressure in recent months.

This had increased overdraft borrowing, he added.

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