With a total debt of 362 billion kroner in 2012, the agricultural sector is on the verge of a collective bankruptcy, warns lobby group Landbrug & Fødevarer.
Ninety-two percent of farmers’ debt is in the form of variable rate loans, and farmers can only keep up with their payments because they are paying historically low interest rates.
Landbrug & Fødevarer said it was concerned farmers were accruing debt at a time when they were harvesting bumper crops and selling their grain for high prices.
Debt must be re-distributed
Henrik Zobbe, the head of the Department of Food and Resource Economics at Copenhagen University, described the situation as a “ticking bomb. Despite the favourable conditions, farmers can’t generate enough funds to reduce their debt,” Zobbe told Jyllands-Posten newspaper. “It just goes to show that agriculture debt has simply gotten too immense.”
Zobbe said farmers and their creditors would need to agree to re-distribute losses in order to reduce debt levels to manageable amounts.
Martin Merrild, the chairman of Landbrug & Fødevarer, said the high debt levels threatened to make farmers uncompetitive globally.
“When interest rates rise we are going be hit much harder than our foreign competitors,” Merrild told Jyllands-Posten.
The business and growth minister, Henrik Sass Larsen (Socialdemokraterne), has indicated that he will make agricultural debt one of his top priorities.