Bumper cropping seasons and a rush of purchases to take advantage of federal government tax incentives on asset purchases underpinned a surge in farm equipment finance last year.
National Australia Bank has confirmed another record year in regional and agribusiness equipment finance lending volumes.
On the back of successive above average seasons and bullish global grain markets, NAB's equipment finance lending to the farm sector at the end of 2021-22 was up 47 per cent on pre-pandemic levels.
Although rising input costs and equipment shortages constrained some spending intentions, regional and agribusiness executive, Khan Horne, said overall agribusiness equipment borrowings still grew three per cent, with particularly strong grain sector spending.
Finance for large grain and general haulage trailers surged almost 60pc, followed by headers, which jumped 18pc.
"Customers' appetite for new and used equipment continues to be strong," Mr Horne said.
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Last year, NAB's Western Australian customers led the equipment finance charge, buoyed by a consistent run of strong seasons in the west.
In dollar volumes, WA borrowings rose 28pc compared with 2020-21, underpinned by a 96pc increase in agricultural implement purchases.
"While some asset classes have been down, such as cars and tractors, we know this was due to supply chain issues that continued throughout 2022," Mr Horne said.
In NSW, finance deals written for trailers and headers both increased 24pc, while in Queensland, finance for trailers leapt 72pc and headers, 24pc as the state's grain sector bounced into its first big grain yielding harvest in many years.
In Victoria, finance for headers and trailers both increased 11pc.
In the Northern Territory, there was a 302pc increase in finance for tractors and 247pc rise for headers, although coming off a low base.
"Demand remains high, and we expect this to continue at least to June 30 when federal tax incentives on asset depreciation are scheduled to cease," Mr Horne said.
He said in general the lending data reflected solid ongoing growth among regional and agribusiness customers.
"Many farmers across the country have had an excellent run of seasons, including some experiencing record-breaking 2022-23 winter crop harvests.
Cost rise caution
However, Grain Producers Australia chief executive, Colin Bettles, noted rising interest rates and extreme highs in farm input costs, including the past few years of rapid machinery price rises, had made many farmers cautious about their budgets this financial year.
"We've had record high crops and prices for a couple of years, but last season's grain crop was also the most expensive ever planted," he said.
"Input costs are always at the forefront of farmers' minds, especially now with the prospect of seasonal conditions being less rewarding than in recent years."
While new machinery was an investment in extra efficiency, he said the extra technology costs associated with buying new gear today had to be weighed up against the reality of more costly maintenance, fertiliser, herbicide, fuel, labour and borrowing expenses hitting farmers' bottom lines.
NAB's Mr Horne said plenty of equipment financing options were open to primary producers to consider in consultation with their banker, broker, or financial adviser, including options to decarbonise their business and build climate resilience.
Greener options appeal
In December NAB joined several other farm lenders introducing finance packages for a wide range of "green" vehicles and energy efficient equipment to encourage improved farm efficiency and cut emissions.
Its Agri Green Loan had seen a 300pc jump in pipeline activity since its launch after an initial 12-month trial offer with customers looking to invest in eligible on-farm practices and technologies which reduced their emissions.
Recent research by the bank also found one in five small and medium-sized business owners strongly intended to improve their operational sustainability in the next two years.
A quarter felt sustainability was now more important to them and was prompting them to choose an alternative, more sustainable product, service or brand, if available.
NAB's metropolitan business executive, Julie Rynski, said the findings were in line with what she had been hearing direct from customers in regional and metro businesses.
"In particular, we've seen very strong demand from our business banking customers for electric vehicles, with annualised growth rates of more than 400pc from 2021-22 to 2022-23.
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