Study reveals impact of last financial year on many balance sheets

A new report has revealed for the first time the true impact of the 2023-24 financial year on Victorian livestock producer finances and their ability to pay down debt. See the details.

A new report has revealed for the first time the true impact the 2023-24 financial year had on Victorian livestock producer finances and their ability to pay down debt.

Despite the current improved saleyard returns, producers and their businesses will “take years to rebuild”, farm leaders say.

The 2023-24 Livestock Farm Monitor benchmarking project, collated by Ag Vic, shows more than half of all South West Victorian producers got deeper into debt in the period.

And, across all regions, producers’ ability to service debt – pay off interest and repay principal on loans – fell swiftly.

The analysis found in 2023–24, across 133 farms included in the comprehensive study, the average farm cash income spent on interest expenses, as a ratio, was four times higher than just two years ago at 12 per cent of income.

This was caused by a lift in borrowings, falling incomes and rising interest rates.

More than half of all South West Victorian producers got deeper into debt into the 2023-24 financial year.

Of concern, particularly for younger farm businesses, farms with less than 75 per cent equity experienced the heaviest losses.

Victorian Farmers Federation livestock president Scott Young said the results rang true.

“I am right amongst it as a livestock producer facing rising costs, rates, insurance, dry conditions,” he said.

“People have had to spend a lot on feed in the past 18 months and had very low incomes in spring 2023, so it is cumulation of all those factors,” Mr Young said.

VFF Livestock President Scott Young. Picture: Zoe Phillips

“Older farmers I speak to are working crazy hours and are just so disappointed they are not making money at the end of the day – there are quite a few in the 50-70s age group thinking perhaps it is time to retire.

“The message the VFF wants to get to governments is; farmers are struggling and they can’t keep up with all the added costs, caused by the state carrying debt from infrastructure building.”

The new, rebadged fire services property levy, was a glaring example, where farmers’ levies were expected to be pushed from $76m this financial year to $204m in 2025-26.

“I don’t know where farmers are going to get the extra money to pay for hikes like that,” he said.

“Talking debt, farm equity has been eaten into in the past few years and we face a challenging time to service debt.

“It will take years to rebuild to the position we were in before 23-24.

“Prices might be improving now but costs keep going up.”

Mr Young said he hoped the hard times didn’t lead to more farming families leaving the industry, or being forced into taking on renewable energy projects for the income.

“I don’t think governments understand how challenging it is and the impact of costs and taxes.”

Property values could be high, but they didn’t relate to debt serviceability, he said.

Southern Grampians agent Glenn Judd.

Regarding trading and seasonal conditions, Southern Grampians agent Glenn Judd said dry conditions forced a lot of extra feed to be bought in.

“A lot of areas were struggling, the season was so dry early last year and some people had to sell early to have the money to buy feed and hay,” he said.

“A lot of people sold off a lot of cattle then at lighter weights and they were probably undervalued, but they had no option.”

For producers trying to get their finances back in the black, Mr Judd said if they had feed, and cattle were up to weight “they will get rewarded now, and I would think, for the next few months without too much trouble”.