Trends in farm debt: Agricultural lending data 2021–22
ABARES prepares annual reports and data dashboards on the level of lending to the agricultural sector, based on data collected by the Australian Prudential Regulation Authority (APRA) on behalf of the Australian Government Department of Agriculture, Fisheries and Forestry (DAFF).
The 2021–22 APRA collection period is from 1 July 2021 to 30 June 2022. For the 2021–22 report, ABARES also analysed data from the Reserve Bank of Australia (RBA), the Regional Investment Corporation (RIC) and ABARES farm surveys.
This dashboard was last updated on 25th July 2023. The PowerBI dashboard may not meet accessibility requirements. For information about the content of this dashboard contact ABARES.
- Debt financing is of critical importance to the farm sector, both to fund new investment and to help manage variability in farm revenue and profit. For broadacre and dairy farms—which collectively accounted for around 68% of the value of farm output in 2021–22—the two main reasons for borrowing are to fund land purchases and for working capital.
- The latest agricultural lending statistics provided by the Australian Prudential Regulatory Authority (APRA) show an increase in aggregate lending to the farm sector in 2021–22 of 9% (in real terms). The aggregate value of loans outstanding increased from $100.7 billion at 30 June 2021 to $109.9 billion at 30 June 2022.
- APRA data show an increasing trend in lending to the farm sector since 2016–17. Annual increases in aggregate lending (in real terms) between 2016–17 and 2020–21 have been 2.9%, 3.7%, 5.5%, 5.8% and 9.0% respectively.
- Analysis of ABARES farm survey data shows that much of this increase in borrowing has been for on-farm investment, particularly land purchases. Rising land prices and low interest rates have provided farmers with greater equity to support increased borrowings, while historically high farm incomes in most agricultural industries have substantially improved farmers ability to service debt.
- Lending to the farm sector increased in all states and territories during 2021–22, with the largest percentage increases in real terms occurring in Victoria (14%) and Tasmania (14%).
- In 2021–22, and prior to recent interest rate increases, aggregate interest paid by the farm sector increased by 10%, largely in line with the increase in total borrowing by the sector.
- The average proportion of farm cash income (total cash receipts less total cash costs) consumed by interest payments has trended down in recent years due to higher farm incomes and lower interest rates. In 2021–22, the average proportion of income consumed by interest payments was 8% for broadacre and dairy farms—an historical low. However, this proportion is likely to increase in 2022–23 as a result of recent increases in interest rates.
- A high proportion of aggregate debt is held by a small number of very large farm businesses that generate high cash flows on average to service debt. In 2021–22, 5% of broadacre and dairy farms accounted for around 50% of aggregate debt, whereas nearly 50% of farms had very little or no debt.
- The proportion of broadacre and dairy farms with relatively low additional borrowing capacity (equity ratio of less than 70%) and relatively high debt servicing commitments (interest payments greater than 40% of farm cash income) was just over 1% of farms in 2021–22—compared to an average of 7% of farms over the last 20 years.
- The aggregate value of loans and leases that were more than 90 days past due decreased by $81 million during 2021–22. When expressed as a share of total lending, loans more than 90 days past due represented 0.7% of loans and leases in 2021–22 compared with 0.9% in 2019–20.
- Monthly data published by the Reserve Bank shows that aggregate lending to the farm sector has continued to increase in 2022–23, rising by around 7% between 1 July 2022 and 31 March 2023.