AFTER a year of dry weather and declining commodity prices, the outlook for Australian agribusinesses has brightened along with improved seasonal conditions, new NAB data shows.

NAB’s third annual 2024 Regional and Agribusiness Horizons Report released today reports agribusinesses across Australia demonstrated remarkable resilience in 2023.

NAB, Australia’s largest lender to agricultural businesses, saw demand for credit from the agriculture sector grow by 9.1pc in 2023, despite an adverse interest rate environment, a projected dry summer and some difficult trading conditions.

There was also an appetite to invest in equipment, with transaction numbers for agricultural equipment and machinery increasing 15pc.

NAB Executive Regional and Agribusiness Khan Horne said Australian agricultural production is set to remain strong by historic standards.

“In 2023, predictions were made, then didn’t eventuate, causing markets to swing wildly. A forecast El Niño became a summer wet enough to cause serious flooding in Far North Queensland, damaging fruit crops and putting some roads out of action for months,” Mr Horne said.

“Readying for a dry season, beef and lamb producers – and speculators – were quick to destock. In turn, prices fell, overcorrecting off strong levels to drop more than 50pc at their lowest.

“In a year full of surprising turns of fortune, Australian producers once again demonstrated that they’re prepared to meet good seasons and bad with the right finances, strategy, hard work and character that allow them to overcome and thrive.”

Farm Management Deposit volumes grow

NAB’s Farm Management Deposit (FMD) volumes grew 27pc in 2023. Growth in most states was strong, including Western Australia with 48pc growth, New South Wales with 33pc growth, and Victoria with 29pc growth.

“Department of Agriculture, Fisheries and Forestry reporting underscores the resilience of the agricultural sector, with total FMDs across Australia surging from $5.8 billion at the close of 2022 to $6 billion by the close of 2023, despite a slight decrease in the number of accounts,” Mr Horne said.

“This growth signals a financially sturdy agricultural landscape, prepared to navigate the challenges ahead with resilience.

“It also reflects a more sustainable pace of growth after several years of rapid investment.

“Looking ahead, with expectations for prolonged stability in the interest rate environment and a projected year-end Australian dollar valuation around US 73 cents, producers can anticipate a more favourable trading and export environment in 2024.”

Rural property trends towards consolidation

NAB Head of Valuations and Property Advisory Mark Browning said producers are focusing on consolidating their rural property holdings, rather than diversifying.

“In recent years we’ve also seen new records set in some commodity prices, swinging overcorrections, and bounce backs almost as fast. But rural property markets are not too tightly tied to the short-term or commodity cycles,” Mr Browning said.

“Buyers are generally more concerned with longer-term factors and business planning – investing in good cropping or grazing land is a decision made with an eye decade beyond the next sales season.

“Foreign and institutional funds are making up a larger share of buyers and are interested in cropping and enterprise properties over $50 million. For foreign buyers in particular, any transaction made while the Australian Dollar is under US 70 cents reflects a favourable purchase.

“Owner-operator bidders are still buying through the fence, but more selectively.

“Neighbour-to-neighbour transactions will remain typical, with producers interested in growing that core business while conscious of access to capital, trading conditions and long-term plans.

“We will likely see fewer intra-regional purchases as producers consolidate and grow their core business.”

Source: NAB. To read the full report click here