Global Food Forum: Banks tighten screws on distressed farmer borrowers

Banks are intensifying their scrutiny of farmer borrowers grappling with the triple blow of rising interest rates, weaker farmgate returns and challenging seasonal conditions.

Jaclyn Hope, director of LAWD; during a conversation on 'Finding Capital to Invest in the Future of Food' at The Global Food Forum 2025 in Melbourne. Picture: luis Enrique Ascui

Banks are intensifying their scrutiny of farmer borrowers grappling with the triple blow of rising interest rates, weaker farmgate returns and challenging seasonal conditions.

LAWD agribusiness transactions senior director Jaclyn Hope told The Australian Global Food Forum in Melbourne on Friday that financial distress was hitting farmers at the highest rate in a decade, prompting increased intervention from banks and other lending institutions, as well as the Australian Taxation Office.

This comes after a period of significant investment in Australian farmland during 2021 and 2022, driven by a combination of low interest rates, strong commodity prices and favourable seasonal conditions. During that time, many family farmers seized the opportunity to embark on once-in-a-generation expansions, leveraging up to scale their operations.

Ms Hope told a panel session on future capital investments in agriculture there was now more distress in the sector, leading to more farms hitting the market.

“I would say we are seeing more distress at the moment than what we’ve seen in the past 10 years,” Ms Hope said.

Ms Hope said distress was occurring when businesses were particularly highly leveraged, before interest rate rises and inflation escalated. Before the Reserve Bank cut the official cash rate in February, the benchmark rate was at a decade-high 4.35 per cent.

“That’s been really difficult to recover from,” she said, adding that it was leading to pressure to sell.

“It’s not just the banks, so we’re also seeing appointments from the ATO, and also seeing appointments from (finance groups).

“People have probably just extended themselves a little bit too far and haven’t been able to keep up with interest rates and inflation.”

Bert Glover, founder and US chief executive of Impact Ag, during a conversation on 'Finding Capital to Invest in the Future of Food' at The Global Food Forum 2025 in Melbourne. Picture: luis Enrique Ascui

Ms Hope said rural transactions across Australia had picked up this year, following a subdued 2024.

She cited succession planning, particularly among smaller farms, as another factor driving family farm assets to market. Additionally some investment funds were reaching the end of their cycle, prompting managers to “crystallise” gains made.

Ms Hope said potential changes to tax legislation, particularly around capital gain, were also influencing activity in the rural transaction space.

Areas attracting interest from buyers include east coast properties with scale and water, cotton, as well as mixed farming.

“People want diversity, they don’t necessarily want to be exposed to just one commodity,” Ms Hope said.

Meanwhile, Bert Glover, founder of investment company Impact Ag, said there was a rise in investment interest in “agriculture as a nature-based solution that can address climate change”.

“Our investors are all about ‘how we can we have good diversified revenue streams’ … on top of that ‘where are the carbon opportunities, renewable opportunities, biodiversity’,” he said.

He said European capital was attracted to green investments and the role agriculture could play, and that type of investor also wanted to see environmental key performance indicators met.