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Grain price improvements create opportunity for storage investment

amc

Higher grain prices currently boosting the confidence of UK cereal farmers provide a timely opportunity for many to upgrade storage and drying facilities that may be in need of improvement.

Sue_Allington
So says Sue Allington, East Anglia Regional Agricultural Manager for The Agricultural Mortgage Corporation plc (AMC), who believes that without the right investment too many farms are falling behind the standards required by a modern industry that expects, clean, dry, segregated and value added grain.

“Investment should be designed to help overcome periods when grain prices are less buoyant, as will inevitably happen in this era of market volatility, she says.

Whether an expansion or an improvement of facilities, it is important that investment adds value to the business and that any interest repayments are affordable. Investing in a store is a long-term decision and so repaying over a long period at a fixed rate might make sense.

Continued low interest rates currently make any long-term investment more affordable, but rates can be expected to increase in the future so borrowing strategy needs to be considered very carefully, advises Sue.

The Bank of England base rate has been at an historic low of 0.5% since March of last year and that is reflected in the low variable and fixed interest rates. However, as the economy picks up, interest rates might increase too. Growers should take that into consideration when planning their investment.

Lloyds TSB Corporate Economics team predicts that base rate will gradually increase over the next year reaching 1.5% by the end of 2011. It could then be at 4.25% by the end of 2014.

AMC is unique in that it only lends to land-based businesses. It offers loans for up to 40 years and can offer interest-only loans. The strength of AMC is that it can tailor loans to suit the individual requirements of the farm business.

Sue Allington and other members of the AMC team will be at the UK Grain exhibition on the 3rd November at Peterborough Showground.

For more on the AMC see www.amconline.co.uk.

The Agricultural Mortgage Corporation PLC (AMC): AMC has been lending exclusively to the agricultural industry since 1928, and today has a ~30% share of the medium to long-term lending market in agriculture in the UK. As such, AMC is a market leader in the provision of medium and long term secured loans to the UK farming industry and aims to be the lender of choice on the basis of competitive terms and quality of service. AMC is a wholly owned subsidiary of Lloyds TSB Bank plc.

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