Machinery suppliers reap a rich harvest as farmers rebound from drought

New tractors, harvesters and sprayers are working their way across the nation’s farmlands.

Better conditions have given farmers confidence to invest. Picture: Bloomberg

New tractors, harvesters and sprayers are working their way across the nation’s farmlands fuelled by record low interest rates, budget stimulus measures and a good dose of confidence thanks to favourable weather which has encouraged machinery investment in the rural sector.

The Commonwealth Bank has pointed to a 50 per cent increase in its asset financing for agricultural machinery for the first four months of fiscal 2021 as farmers accelerate expansion plans and look to better and more efficient equipment to reap the substantial benefits of excellent crop production.

Commonwealth Bank executive general manager for regional and agribusiness, Grant Cairns, said NSW had led the growth with lending up more than 100 per cent in the state for July to October, compared with the same time last year.

“For many of Australia’s farmers, this year has been a rebound from drought with favourable growing conditions, a successful winter crop in many regions and strong optimism about yields and quality of harvest,” Mr Cairns said.

CBA said that its financing for new farm equipment in Western Australia was up 72 per cent over the four-month period, up 69 per cent in Queensland and up 30 per cent in Victoria.

Among specific farm machinery, CBA customer tractor purchases were up 119 per cent as October posted the largest month for tractors since September 2017. Harvesters were up 108 per cent, sprayers up 59 per cent and (harvesting) headers up 25 per cent.

“I think we started to see it (increase) in April and May, a number of farmers kicked off the sowing for this season given that conditions are looking a lot more favourable this year and quite candidly over the last few years it has been quite challenging in many parts of Australia, particularly NSW and Queensland,” Mr Cairns told The Australian.

He said these better conditions gave the farmers confidence to invest, and that was coupled with stimulus policies flowing from the federal budget.

“I think it has been also stimulated again by the announcement in the budget of the investment allowance which has really been extended to so many businesses with 100 per cent deductions, makes it incredibly compelling.

“And then you add on top of that very low interest rates, record low interest rates, I think it is just fuelling the confidence for farmers to invest in new plant and equipment.

“It has certainly been a very encouraging trend.”

This instant asset finance write-off scheme from the government was providing further incentive for farming businesses looking to take advantage of the positive outlook and expand.

“Agriculture confidence is at an all-time high for a number of reasons — nationally, farm values are up, commodity prices are holding firm, interest rates are at record lows, seasonal conditions have been good, there is strong consumer and retail demand for fresh produce, and there’s government incentives like the instant asset write-off scheme.”

Mr Cairns said although the international trade environment remains volatile, it’s positive to see so many agribusinesses turn a corner and enter a period of expansion.

Simon Codemo of Codemo Machinery Services, a business based in Griffith and supplying to the Riverina area, said he had witnessed big changes in NSW over the past 12 months.

“Obviously the weather and improved seasonal conditions is a big part of this. Fortunately, the break in the weather came early enough this year to give our cropping areas an early start for winter planting,” he said.

“This weather, combined with low rates, stable commodity prices and the instant asset write-off scheme has boosted farmer confidence.”