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Government Promises to Assist Young Farmers to Purchase Land

Government Promises to Assist Young Farmers to Purchase Land


Government Promises to Assist Young Farmers to Purchase Land

Article by: Hari Yellina

If elected, the government has promised to assist young farmers in purchasing their first property by guaranteeing up to 40% of the loan. Agriculture Minister David Littleproud, who revealed the $75 million programme during a televised discussion with Labor’s Julie Collins, said the scheme would be capped at $1 million and would provide young farmers with reduced lending rates and fewer equity requirements. According to him, the most significant impediment to people starting their own agricultural business is a lack of finance. “Existing landowners are getting older – the average broadacre farmer is 62 years old, with only 10% under 47,” Mr Littleproud explained.

“Without this Government guarantee, acquiring a bank loan to launch a profitable firm is extremely difficult due to rising land values and the customary 40 to 60 percent equity deposit required by commercial banks.” To be eligible for the plan, which will begin on January 1, 2023, candidates must have at least three years of on-farm experience, a minimum deposit, and be a good lending prospect for the banks, according to Mr Littleproud. Loans will have a maximum length of ten years, with a two-year extension option for applicants who are enduring extreme financial hardship. A maximum loan-to-value ratio of 70% will be imposed. Ms Collins stated that many agricultural families were having difficulty breaking into the market, but she had just recently learned of the programme and would need to review the facts before deciding whether Labor would support it.

“On the surface, my reaction is to distrust a former banker [like Mr Littleproud] on some of these issues,” Ms Collins remarked. “We need to be very careful not to duplicate any of the other financial services that some of our financial institutions already provide in these areas, so we’ll take a close look at it.”

The Younger Generation in the Farming Landscape

So, what can agriculture’s kids do to go back on the farm? The increasing corporatization of farming over the last decade has resulted in record levels of money descending upon farmlands, contributing to a continuous increase in land prices that, sadly, are now out of reach for most new farmers. This is complicated by the fact that most banks are hesitant to lend to younger farmers who lack a track record of profitable operations and who are unlikely to have sufficient collateral. As a result, it appears that the traditional owner-operator model will not work for these newcomers. While leasing eliminates the need for upfront finance, it does not give the farmer with long-term assurance about their land access, and leases with an option to buy simply postpone the need for capital (unless the farm has been extremely profitable during the lease period).

Another option is share farming, which is similar to the lease operating model but that instead of paying set rates, farmers participate in a risk-weighted profit-sharing structure. Unfortunately, unless a specific equity method has been agreed upon, this does not provide land ownership, and many young farmers believe they are not given the autonomy they require to impact results.