Banks and farm-feed suppliers criticised by Dail committee members

Delegations from the banks and the animal feed industry faced accusations of extortionate interest rates and opportunistic price increases when they appeared before a Dail committee yesterday.

Mr John Ellis (FF), chairman of the Joint Committee on Agriculture, Food and the Marine, said it was unacceptable that farmers were paying 9 and 10 per cent interest on loans at a time when banks were paying "practically zero per cent to depositors".

It was also a fact, he continued, that "big business has money as low as 1 per cent above the interbank rate", leaving a minimum 4 per cent difference between them and borrowers in a weaker position.

His comments were echoed by Mr Willie Penrose (Lab), who said that when lending rates should reflect inflation, they were currently running at four times the figure. Why were interest rates "all the same", he asked.

The head of business banking at AIB, Mr John Kelly, said it was unfair to compare deposit and lending rates. The banks' typical lending margin to farmers and other similar businesses was only "2 to 21/2 per cent", he added.

He agreed with Mr Paul Connaughton (FG) that it was "technically possible" that a Cavan farmer the TD had spoken to was paying 14 per cent interest on a loan, because of penalties or perhaps a fixed rate agreed during the currency crisis of the mid-1990s. Mr Kelly agreed with Senator Francis O'Brien (FF) that the next few months would be critical for farmers. "The real issue is market prices, and until we see some sort of recovery farmers will hold on to cattle, on limited fodder." Mr Maurice Keane, agricultural adviser in the Bank of Ireland, rejected criticisms from Mr P.J. Sheehan (FG), who claimed banks had fuelled land-price inflation by promising unqualified support to rival bidders for the same properties. A bank could not be the adjudicator as to which bid succeeded, Mr Keane said. That would be a disservice to those refused loans as well as to the seller of the property, who might also be a client of the bank.

Mr Ellis said there was a definite need in farming for longer-term, mortgage-type lending. This was available elsewhere in Europe and was widespread in South America, Australia and New Zealand, regions with which Irish farmers must compete.

Questioning a delegation from the Irish Feed and Grain Association, Mr Connaughton said it appeared that a "certain amount of profiteering" had been going on in recent months at the expense of fodder-buying farmers. "It appears to me you are taking advantage," he said.

Mr Noel Ryan, representing Dairygold Co-op Society Ltd, said that was "certainly not the case". Feed prices were "significantly cheaper" than 12 months ago, and when the fodder crisis became apparent last autumn, there had been two price reductions. Mr Ellis retorted: "Don't tell us there haven't been increases, when we're all getting the invoices to tell us another story."

The director of the IGFA, Mr Seamus Funge, said that when industry representatives attended a meeting at the Department of Agriculture on February 1st to discuss the new fodder scheme, "not a single complaint" had been raised about inflationary prices in compound feeds.