Despite last year's dry weather worries and sliding market prices, National Australia Bank says agricultural business appetite for investment kept growing, and so did farm management deposits.
NAB's agribusiness loan book expanded 9.1 per cent in 2023 - well ahead of solid regional business lending growth of 3.7pc.
"That growth in agribusiness lending occurred despite an adverse interest rate environment, a projected dry summer and some difficult trading conditions," said NAB's agribusiness and regional banking executive, Khan Horne.
Data from NAB's latest annual Regional and Agribusiness Horizons Report indicated short and long term business confidence in the bush in all states even though farm production and markets could continue to be challenging in 2024.
Farm equipment lending alone increased 15pc last year, while demand for electric vehicle finance in regional areas, via the bank's Green Finance platform, jumped 283pc.
At the same time, farmers took advantage of higher interest rates to put away extra funds in farm management deposits as the Reserve Bank of Australia's official cash rate lifted from 3pc to 4.35pc.
FMD numbers leap
Although NAB's total agricultural deposit numbers actually declined 3.3pc, its FMD volumes leapt by 27pc during the calendar year.
Growth in its rural term deposits was strong in most states, but notably up 48pc in Western Australia, 33pc NSW, and 29pc in Victoria.
NAB's experience reflected a significant national rise in FMD balances during the year - up from $5.8 billion to $6 billion by December, despite a dip in the number of accounts, according to the Department of Agriculture, Fisheries and Forestry.
Mr Horne said the size of the national FMD balance underscored the resilience of the agricultural sector.
He also noted new year general deposit numbers could tick up as farmers settled their harvest cash receipts after a stronger than expected summer.
Regional business deposits grew 8.5pc in 2023, which would set them up well for any turbulence in the year ahead.
He said agriculture's deposit balances suggested robust growth in a "financially sturdy agricultural landscape where customers were prepared to navigate the challenges ahead with resilience".
"The FMD figures also reflect a more sustainable pace of growth after several years of rapid investment," Mr Horne said.
Meanwhile, increased lending to regional businesses also suggested a changing face and entrepreneurial spirit in country areas.
Regional growth
"With new community infrastructure and services rolling out, and businesses catering to local and regional demands, 2024 promises to be another exciting year of growth for regional Australia," he said.
After recent increased migration and new business opportunities in country communities, NAB predicted solid growth in regional manufacturing and transport investment, and demand for commercial property.
Its loans to transport businesses grew 10pc last year, manufacturing grew 6pc, and construction and property services about 7pc.
Mr Horne said regional manufacturing was likely to become a driver of significant opportunities for other businesses.
"As transport infrastructure links across the nation expand and improve, and with commercial property in the country looking cheap relative to the capitals, regional manufacturing is likely to become a driver of significant opportunities for other businesses, and for local employees," he said.
WA led NAB's rural and regional new lending activity with 12.6pc growth, followed by Queensland, Tasmania and Victoria all at about 7pc.
High rates prolonged
The bank believed interest rates had peaked, but borrowers would see "prolonged stability in the interest rate environment", with the RBA unlikely to cut rates until November.
Although NAB tipped the Australian dollar to end 2024 well up from its current US66 cent territory at US73c, Mr Horne believed farmers could still anticipate a more favourable trading and export environment this year.
"However, predictions can make fools of us all - just look at this summer's El Nino which turned out to be a particularly wet one," he said.
"There is always the risk of black swan events.
"The conflict in the Middle East, for example, is disrupting supply chains that were only just repairing themselves.
"I am sure, however, consumers in Australia and abroad will continue to demand good, nutritious food and regional Australia will continue to meet this demand."
Although farm commodity prices had trended lower last year, NAB's Rural Commodities Index now showed a considerable 15pc recovery since October, to just 5pc down on 12 months ago.
Helpfully, some farm input prices were declining, including electricity, with energy costs expected to keep dropping in 2024, although fertiliser prices were still above pre-pandemic levels.
NAB's associate director of economics, Lea Jurkovic, said although agricultural production was set to remain strong by historic standards, 2024's expected lower production and prices should be made easier by declining input costs.
Labour shortage relief was also expected with more increases in Temporary Skills Shortage visas for agriculture.