The agricultural sector has been made happy again with a dead sparrow

Monday 29 April it came news revealed that almost €2 billion is available for young farmers and the bioeconomy in Europe. It is being sold as if the entire agricultural sector has now been saved and it should be seen as a helping hand towards the future.

First of all, thank you very much for making money available to borrow. Am I crazy that I don't jump straight into the air? How dare you put away borrowing as a gift. In addition, it is also a lousy 'gift'.

Young farmers
It concerns €1 billion promised by the European Investment Bank (EIB) and they are counting on the participating European banks (which are entitled to the money) to add the same amount. 700 million is available for agricultural small and medium-sized enterprises, of which 10% for young farmers. France has already been promised two loans of 275 million. 6% of all young farmers live in France. €700 - €275 = €425 million. 10% of that is 42.500.000/408.900 (94%) = €103,94 per farmer.

Suppose you have found the courage and are going to borrow money. Or as European Commissioner Phil Hogan says: "Access to finance is a barrier to continuing the business." Is he saying that the banks are too childish in lending to agricultural companies? Or does he say that if you can't get money for a reason, they still want to lend you money?

Borrow extra long
Now I can borrow for an extra long time (15 years) and I must apparently be grateful for that, given the comment about 'advantageous conditions'. A simple calculation (below) shows what everyone knows, of course. If I calculate with an interest rate of 2,5%, then I pay almost 3 times as much interest in 15 years as I would in 5 years.

In addition, we are not talking about starter loans, but about a loan on top of the existing loan capital. An average agricultural company has approximately €900.000 in debt outstanding.

The starter loans or the loans for innovation are effective, provided the goal is to grow. Growth must only be achievable through extra support. However, borrowing with the knowledge that (whatever investment you make) you can at best keep the same income level is irresponsible. To call this support is almost an insult. 

Boerenbusiness

below Boerenbusiness opinions are posted from authors who, in principle, give their opinion once Boerenbusiness.nl or from people who prefer to remain anonymous. Name and place of residence are always known to the editors.

© DCA Market Intelligence. This market information is subject to copyright. It is not permitted to reproduce, distribute, disseminate or make the content available to third parties for compensation, in any form, without the express written permission of DCA Market Intelligence.