AgriStarter loan not the head start many were anticipating

Young farmers are being priced out of the property market. So why have they not taken up the Federal Government’s $2m loan to help secure their own land?

Less than a quarter of the money allocated by the Federal Government to help young farmers into the property market has been handed out.

The Weekly Times can reveal just $17 million from the Government’s $75 million AgriStarter Fund scheme, announced during the 2019 federal election campaign, has been allocated.

At the time, Agriculture Minister David Littleproud vowed to establish the AgriStarter Fund scheme to help new farmers purchase a farm by offering loans of up to $2 million, to be administered by the Regional Investment Corporation.

The scheme has been beset by delays. Despite being promised in May 2019, its launch was delayed until January 2021 to give the RIC time to process thousands of loans for drought-stricken farmers.

But by July last year, just 10 AgriStarter loans had been approved from 120 applications, with just 15 granted since then, worth a combined total of $17 million. This is despite more than 270 people registering their interest before the program launched.

Last week on the campaign trail Mr Littleproud announced another $75 million program, again targeting new farmers unable to buy their own land.

Agriculture Minister David Littleproud, said the AgriStarter Loan scheme had achieved its goal of creating competitive tension in the marketplace. Picture: Sean Davey.

National Farmers’ Federation president Fiona Simson initially thought the new scheme, called the Future Farmers guarantee, was replacing “the failed” AgriStarter Loans scheme.

Mr Littleproud clarified that the Future Farmers guarantee would complement the AgriStarter Loan, by offering to guarantee 40 per cent of a new farmer’s commercial loan of up to $1m, and hit back at the peak farming body for not coming up with any of its own solutions to help young farmers buy land.

“It’s only us who have come up with these policies. I haven’t seen any policy setting from any party or peak ag group to find a new way to do it,” Mr Littleproud said.

He said the low number of AgriStarter applications was unsurprising, given “it’s a vanilla product you can get from a commercial bank and it’s all about putting tension in the marketplace”.

Valuer and agricultural economist Sam Paton said the lack of interest could be because educated buyers were waiting on the sidelines until prices corrected themselves.

“Historically all of these cycles tend to end with a negative adjustment,” he said.

Nationally, the median price per hectare for farmland increased 18.4 per cent last year to a record $7060 per hectare, according to Elders.

Mr Paton said there could also be more nuanced issues at play.

“Many would think this is welfare money … ‘I want money from a private sector lender, I can stand on my own two feet’.”

Elders head of agribusiness investment services Mark Barber said it was positive the government was trying to support young and new farmers, but it was doing so during what could be historically the most competitive time to buy farming land in their lifetime.

“Yes you can give these guys a leg up, but they’re doing it in a period when competition for land is extraordinarily high. This is unprecedented for this generation,” Mr Barber said, adding the supply of properties on the market was extraordinarily low, competition from existing farming families was extremely high, during a period of good seasonal conditions, good commodity prices and low interest rates.

Mr Barber said the RIC’s interest rate of 2.31 per cent was up against stiff competition from the Big Four banks.

However one of the 25 loan recipients – who did not want to be named – said he and his wife were knocked back from a private lender, which saw them as inherently risky.

“The banks said ‘we can see risks everywhere’. Whereas the RIC said ‘yes, this has merit, let’s try and get this approved’.”

He said many young and new farmers however had little financial literacy, and saw the paperwork involved as a hurdle.

“Paperwork scares people, particularly younger generation farmers without the skill set or network to do the application and budgets,” he said. “When you cut through it, the loan needs to be fully secured, it’s not money for nothing. We struggled with security as well.”

RIC director Prue Bonfield said the RIC was focused on how to help young people establish farming businesses on their own land.

“I talk to young people weekly, they’re problem is actually how do we get the funds. Debt financing is really difficult for young people with no equity already in a farm. At the RIC its our purpose to try and get those young people established, have succession plans in place for them now so they can be that next generation to enjoy the farming community,” Ms Bonfield said.

She said there was a lot of interest in the AgriStarter loans in NSW and Queensland.