Farm businesses feel the pinch

Haidee VandenbergheCountryman
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Obtaining finance might not have been as tough as last year, but financially farm businesses are still feeling the hangover from seasons past.

Banks say it is a mixed bag across the agricultural region and although some areas did well from last year's bumper harvest, for many growers it was simply a break-even year.

Others moved further backwards after a succession of dismal years.

Rabobank State manager Crawford Taylor said low requests for working capital in northern areas demonstrated there were good returns on budget last year but debt levels across the central and eastern Wheatbelt had mostly been maintained.

Despite a positive medium and long-term outlook for agriculture, some growers had simply moved "sideways" over the past 12 months and Mr Taylor said very few had not been financed for the coming season.

"There have been some businesses that have retreated from 2011 and have found it more difficult this year," he said.

"In the main, I would say well and truly the majority of our clients have got access to the funding they require this year."

Mr Taylor said the positive news was that, in general, the agribusiness sector had improved on 2010.

"The environment for finance broadly is not anywhere near as tight as it was in 2011," Mr Taylor said.

"At least on balance most people have had a break-even year and in some situations all they're looking to do is operate within their existing (finance approved) limits that were set last year."

But debt levels remain an issue for many growers, and Westpac Agribusiness WA head of grains Chris Moore said farmers would need to start working on strategies to become less reliant on debt.

"I believe it's going to be a tough few years for the sector, but I don't think we have a make or break scenario anymore," he said.

"There is still promise, but the challenge will be while we have a low wheat price and grain price more generally, the industry is going to struggle.

"But I'm heartened by some of the creative solutions by farmers coming into this year to rejig their balance sheets and make their businesses viable and profitable."

Mr Moore said Westpac had financed all of its customers, although "not necessarily to the level of finance they would have otherwise liked".

He conceded there had been some discussions around finance hinging on leasing out land to generate a revenue stream.

"We've had some conversations along those lines where the economics for that farmer do not make sense to be farming," he said.

"Leasing that property out, the farmer would make more money … than they would trying to farm it themselves given their current financial position.

"That would be the only reason you would do that - it is to improve their cash flow."

Bendigo Bank agribusiness manager Steve Sims said the bank had experienced an increase in growers, particularly those in tight financial circumstances, "shopping around".

"The ones that are in financial trouble are the ones that will inquire every year, but we're not necessarily picking up all of them," he said.

However, he confirmed all of Bendigo Bank's current agribusiness clients had been financed for this year.

Mr Sims said he had received feedback from growers that other banks had requested the growers get debt levels down before receiving finance for the coming season.

Mr Taylor said there had been a handful of clients that needed to repay principal last year to reduce debt levels, but due to the season's break-even result and depending on individual client circumstances, some principal reduction had been readvanced as working capital this year.

"Most would be looking to pay back debt when and if they can, either through having a good farming season or potentially sale of assets," he said.

"As a generalised comment not specific to Rabobank, some of the activity you see around land sales or properties listed for sale this year would show (restrictions on finance).

"You look at the market, growers are very conservative, property sales and volumes are well back on what they were three to four years ago.

"The overriding mood among growers is to consolidate their positions before they make any moves.

"There would be a percentage of growers that couldn't afford another tough year in 2012.

"But the resilience among the farm sector is strong and that is helping."

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