Equipment finance loans to NAB small business customers have jumped 341% in total value over the past two years, as farmers around Australia are stocking up on critical agricultural equipment.
Latest data from Australia’s largest agribusiness bank shows equipment finance for agricultural businesses generally, taking in enterprises of all sizes, has increased 33% from 30 September 2019 to 30 September 2021.
NAB Executive Regional and Agribusiness, Julie Rynski, said the trends in equipment finance reflected good seasonal conditions creating good economic conditions across Australia and the ongoing uptake of government incentives including the instant asset write-off scheme.
“The generally positive outlook of the agriculture sector, buoyed by solid commodity prices and the prospect of record crops, has seen equipment finance lending for sheds increase 80%, while lending for grain silos has increased 65% over the last two years,” Ms Rynski said.
Among the agribusinesses investing in equipment – and seeing an uplift in investment across their supply chain – is Jim Riordan, Managing Director of Riordan Grain Services, Victoria.
“In recent years, we have seen a significant increase in on-farm investment by grain growers, especially in large silo and storage complexes,” Mr Riordan said.
“Our business model is about finding the best and most efficient ways for the supply chain to deliver quality grain to their global client base in particular. This year was our 25th year in operation and we loaded our one millionth tonne of export grain to bulk vessels. We have upgraded our transport fleet, prime movers, trailers and invested in our facilities to meet the demand.”
Demand for finance for tractors also continues and is up 69% over the same period and NAB expects these trends will continue as farmer confidence remains high.
“The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) is forecasting Australian winter crop production will reach a new national record of 58.4 million tonnes, even with flooding causing some losses and downgrades across several production regions,” Ms Rynski said.
“The area planted to summer crops in 2021–22 is forecast to increase by 36% to reach 1.4 million hectares.
“Farmers are also being incentivised by the instant asset write-off scheme, which was expanded substantially in the 2020-2021 Federal Budget to $150,000, largely as a COVID-19 stimulus measure.
“In the 2021-2022 Federal Budget, the scheme was extended for one year to 30 June 2023, providing a longer window of opportunity for agribusinesses to make on-farm investments.”
Ms Rynski said equipment finance for regional businesses across Australia had also increased.
“Loans for equipment finance to regional businesses have increased 31% over the last two years,” Ms Rynski said.
“Finance for cars and light commercial vans is up 43%, while finance for trucks and trailers is up 40%.
“Lending for construction equipment such as cranes and earth movers has increased 39%.
“This is reflective of the ongoing migration of many capital city residents to regional Australia, which is great news for regional communities and their local economies.
“Overall regional net migration grew by a further +14% over the quarter to September 2021, according to data released by the Regional Australia Institute.”