Sector resilient despite major flooding, says industry body
Although it has endured one of the nation’s worst recorded flood disasters, the agribusiness sector continues to show resilience, with bank lending up by almost a third, the Australian Banking Association says.
ABA’s comments, which coincide with National Agriculture Day held on November 21, are in line with those made by Rural Bank. Despite a challenging period across the back half of 2022, over the last three years, the bank said the sector had experienced a run of excellent seasons, rebounding commodity prices and low interest rates.
ABA CEO Anna Bligh (pictured above left) acknowledged that the agricultural industry had a proud record of overcoming extreme adversity, most recently with the major flood events. Banks were ready to support affected customers, who were encouraged to reach out if they needed support.
Beyond current challenges, Bligh said the picture for the agriculture sector looked healthy, and that the industry outlook was positive.
“Bank lending to Australian agribusiness has increased by almost a third during the past year to $104.7 billion as of September this year,” Bligh said.
Bligh said the sector had been supported by strong global commodity prices, and that the “incredible resilience” of those in rural and regional areas had contributed to the bounce-back from drought.
Australian agriculture, which supports the agribusiness sector, pushed through COVID-19 relatively unscathed, and the sector remained well-positioned to contribute to growth in the economy, she said.
The agribusiness industry was expected to continue grow, in line with “strong prices across a range of agriculture commodities”, Bligh said.
“Despite coming off all-time highs, the value of Australian crop exports remained significantly above the long-term average in September 2022. This is an indication of the continued demand for goods produced by Australian farmers,” Bligh said.
Andrew Smith (pictured above right) head of agribusiness development at Rural Bank, a subsidiary of Bendigo & Adelaide Bank Group, acknowledged that the agricultural industry the second half of 2022 had been challenging, as damaging rainfall and flooding events on the east coast impacted producers across a range of sectors.
Despite this, the industry experienced growth.
“The Australian agricultural industry has experienced a run of excellent seasons, rebounding commodity prices and low interest rates over the past three years, which have combined to deliver strong profitability and balance sheet strength for our primary producers,” Smith said.
Following a run of “bumper seasons”, heading into the first half of 2023, the agricultural industry faces a mixed outlook, he said.
“Improving seasonal conditions combined with high commodity prices will assist producers to offset potential quality issues, particularly across cropping and horticultural sectors,” Smith said.
Smith said the bank expected high production costs to remain an ongoing challenge for producers, with input prices and the cost of labour forecast to remain elevated.
Overall, Smith said the agricultural industry was faring well and that there continued to be strong demand for lending within the sector. Rural Bank had seen new lending demand from most industries and areas, with the predominant purpose to purchase farmland, he said.
“These are family-owned operations typically seeking to expand their holdings and, in many cases, accommodate the next generation in their business. Lending is also being provided for equipment and other capital expenditure, off-farm investments and refinancing,” Smith said.
Bligh said banks were invested in the success of the country’s agribusinesses, and that they were working to help communities impacted by recent natural disasters.
Banks offered a range of measures to support impacted customers, she said. Examples included deferral of loan repayments (home, personal and some business loans) for up to three months, the waiving fees and charges, debt consolidation, restructuring existing loans, offering additional finance to help cover cashflow shortages, deferring credit card payments and emergency credit limits.
“As we enter a new era of economic challenges, banks will continue to collaborate with the agribusiness sector, governments and industry stakeholders to ensure product and service offerings support the needs of Australian agriculture long into the future,” Bligh said.