Record farm debt “not a cause for concern”

Agricultural loans and leases rose 6 per cent to a record high in 2020-21, new data shows. Experts say it’s a good thing.

Lending to the farming sector has reached a record $94 billion, with broadacre and dairy businesses accounting for the lion’s share of borrowing.

The latest Australian Prudential Regulatory Authority statistics show lending to the agricultural sector rose 6 per cent in the 2020-21 financial year compared to the previous 12 months, when $87 billion of loans and leases were outstanding as of June 30, 2020.

Australian Bureau of Agricultural and Resource Economics and Sciences executive director Jared Greenville said increasing debt was not a cause for concern but a sign the sector was performing well and that farmers were looking to capitalise on consecutive good seasons and invest in their businesses.

“Because of higher property values, farm business equity has remained steady,” Dr Greenville said.

“Higher commodity prices and two record-breaking seasons have meant farmers have higher incomes to pay down their debts in the short term. As a result, farm incomes are less vulnerable to rising interest rates than they were in the 1990s or the early 2000s.”

Farmland purchases are driving up debt in the agriculture sector. Picture: Zoe Phillips

He said based on ABARES farm survey data, debt was being used to purchase land, infrastructure and equipment and for working capital.

Lending to the farming sector rose in all states and territories, with the largest increases in Queensland and NSW, which were both up 7 per cent.

A handful of Australia’s biggest farming businesses account for almost half of all debt.

“In 2020–21, 5 per cent of broadacre and dairy farms accounted for around 47 per cent of aggregate debt, whereas nearly 50 per cent of farms had very little or no debt,” Dr Greenville said.