Agriculture lending rises as Australian farmers look to expand businesses: ABARES

Farm debt is growing in Australia according to new figures, up 6 per cent year-on-year to $120.5 billion amid ongoing investment in the sector.

Data released this week by the Australian Prudential Regulatory Authority covering the 2022-23 financial year shows lending to the farm sector was up from $114.2b in 2021-22.

Jared Greenville, executive director of the Australian Bureau of Agricultural and Resource Economics and Sciences, said farmers were borrowing more to invest back into their businesses.

“We’re particularly seeing more land purchases, showing that the farmers who are taking on higher debt are expanding their businesses,” Dr Greenville said.

“The risks of taking on this debt are more manageable as well.

“Rising land prices have provided farmers with more equity to support higher borrowings, while historically high farm incomes over the past few years in most agricultural industries supported farmers’ ability to service debt.”

He said the distribution of debt was uneven, with 5 per cent of broadacre and dairy farms — mostly those with “very large” turnover — accounting for just under 40 per cent of aggregate debt in 2022-23.

Nearly 50 per cent of broadacre and dairy farms had “very little or no” debt.

“What is very good to see was the low number of farms in 2022-23 in financial stress due to debt,” Dr Greenville said.

“For example, the proportion of broadacre and dairy farms with relatively low borrowing capacity and relatively high debt servicing commitments was just under one per cent in 2022-23, compared to an average of 7 per cent of farms over the last 20 years.”

“That said, the landscape has changed since 2022-23.”

Dr Greenville said higher interest rates, along with lower average farm incomes and changing seasonal conditions and commodity prices, would have influenced borrowing decisions.