Agribusiness writer Andrew Marshall discusses rising farm debt levels in key Australian regions and what it reveals about the agricultural sector's confidence and investment trends.
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00:00Welcome to AgriCast. We've been looking at farm debt levels here at ACM Agri, and Andrew
00:13Marshall is the national agribusiness writer. How are we looking with farm-level debts?
00:18Broadly, have they gone up or down? We're having a fairly consistent run,
00:22an increase of about 6% borrowing levels over the last five years annually. So we've gone up from
00:30what would have been maybe about $120 billion in 2023, heading towards $130 billion now. That's
00:39quite significant given that five or six years ago, we were only down around $90 billion.
00:44So that's right across Australia. That's for broadacre
00:47croppers, graziers and dairy farmers around Australia.
00:51So where does this information come from? Details come from the Australian Prudential
00:56Regulation Authority, which the banks all report to, and a report compiled by ABARES,
01:03which is the Australian Bureau of Agricultural and Resource Economics and Sciences.
01:08What regions of Australia carry the most debt? Is there any indications there? You'd have to
01:13assume the croppers might have a lot. Certainly industry that is actually
01:17carrying most of our debt or busiest with debt is the specialist cropping sector,
01:22which includes intensive irrigation and broadacre horticulture. The areas that have most
01:28debt are the Riverina in southern New South Wales and West Australian Wheatbelt, Central
01:33and Southern Wheatbelt. The category that grew the most in say the last five years or so was
01:40horticulture nuts and fruit category, which has increased its debt or its borrowing rates by
01:46about 10%. What does an increase in farm debt actually tell us about agriculture
01:51in some ways? It points to there being confidence perhaps if farmers are willing to take on more
01:57debt and banks indeed are going to lend them more money.
02:00Very much so. The reason people are borrowing is basically to invest in business upgrades,
02:06I suppose, expanding their land area, buying more efficient gear or gear that's going to
02:11be more appropriate for bigger areas they're farming. It's basically an investment in
02:15productivity. So what are some of the other
02:17key trends there that you can sort of glean from this data?
02:2040% of all broadacre debt is held by a surprisingly small 5% of Australian broadacre
02:27farmers. The biggest borrowers, as we mentioned, are specialist farmers in the cropping sector.
02:34Half of Australia's broadacre farmers, and that includes dairy farmers, have next to
02:39no debt at all except for maybe overdrafts. So no long-term debt. The sheep industry is
02:44probably in that category. They're probably carrying the smallest amount of farm debt,
02:49on average, $440,000 per farm. We know that interest rates have gone up and
02:54we know that just the costs involved in farm inputs have also gone up. Does this point
03:00to any farm businesses struggling or potentially having to close?
03:05It's quite interesting, actually, and quite heartening in a lot of respects. Equity on
03:09average in Australian broadacre farms is around about the 90% mark, and a lot of that's got
03:16to do with increasing value of land assets. So that helps your equity position. The level
03:21of bank foreclosures, for example, has been declining over the last decade. Interest rates
03:27are an ongoing problem. I'm sure those figures will probably reflect that a little bit more
03:31in the coming financial year. Andrew Marshall, it's been a fascinating
03:35conversation. Now, farmers, we don't like to necessarily talk about our debts personally,
03:39but we certainly like to hear what others are doing. So thank you so much for joining
03:44us on AgriTask.