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Say Cheese, Please

Published: 27 May 2021
Time to read: 3 mins

The viability of any businesses, especially those of farming and rural business, is dependent on cashflow and lending to further generate a future. Often avenues of funding that will fit the farming model can be quite limited in Scotland – but do they have to be? Perhaps we need to be peering over the fence into our neighbour’s holding to see their plan of action. It has been an open secret that Credito Emiliano, one of the major regional banks in the northern Italy region of Emilia-Romagna has historically taken wheels of parmigiano-reggiano cheese as collateral to lending from its dairy farming clientele – a most interesting (and delectable) form of asset finance. Not only that – due to their maturation time – they are kept in climate controlled warehouses by a subsidiary of the bank, which would of course lower any risk from the bank’s perspective as they would control the life and aging of the cheese. Any default on the lending against the cheese would allow the bank to sell it on the open market on cheese maturation. In exchange for the cheese, it allows the farmers to have a tailored financial package that is linked to the value of their matured (or future matured) cheese holding. Such flexibility has allowed the parmigiano-reggiano and dairy industry in Emilia-Romagna to stay with small and medium size holdings – reducing the need for stretched expansion.

Now – would this work in a Scottish model? Possibly, but more likely not. Even though we have seen Ayrshire Dunlop Cheese and Orkney Island Cheddar continuing with their status as Protected Geographical Indication respectively from 1 January 2021 onward post-Brexit– and as delicious as they are – we don’t believe that the world has the same appetite for such as it does sprinkling and shaving of parmigiano-reggiano to command warehouses of cheese capable of asset finance. Anecdotes aside, it does however shines a light on the need for future thinking on funding models in Scotland that are directly related to our producers and our fantastic range of dairy, cereals, vegetables or livestock produced at an exceptionally high standard. With the unknown of the post CAP funding for farmers looming, it is imperative for farmers to look at their books and plan accordingly.

Gillespie Macandrew are leaders in agricultural law and can tailor and deal with a wide array of secured and non-secured agricultural funding from the re-organisation of farming portfolios to complex standard securities from all major lenders to suit our agricultural clients – for this generation and the next.

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