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A rural lender has revealed asset finance for GPS technology is booming as farmers seek precision farming to save costs.
While rising interest rates are weighing on mortgage borrowers, the asset finance sector is continuing to grow, GM agribusiness & third-party distribution at Bendigo and Adelaide Bank, David Onto, told The Adviser.
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The Australian agri-equipment market sits at around $20 billion, with asset finance for agri-equipment around $9.2 billion as at 31 December 2022 (a 12.5 per cent increase), according to the Australian Finance Industry Association (AFIA).
Mr Onto noted the bank had seen a “significant increase in finance requests for new agricultural equipment” as commodity prices remained strong.
He said the farming sector — not impacted by the weather events — was riding the highs of “good seasonal conditions” and “great prices in the past 12 months”.
“Loans are still primarily being written to support farm consolidation as yields remain strong ... [and] they get ready to re-plant following record harvest in non-weather impacted districts,” Mr Onto said.
“Many are now looking to purchase new equipment and to take advantage of the Instant Asset Write-off (government incentive) which comes to an end this Financial Year, which is also a decision driver.”
But he noted ongoing supply constraints, rising interest rates, and input costs from high inflation continued to weigh on the sector.
“Unfortunately input costs remain stubbornly high around fuel, feed, fertiliser and chemicals ... [and] farmers wrestle with higher input costs and interest, due to eight consecutive rate rises,” Mr Onto said.
As such, new machinery coming into the country is arriving with “updated GPS technology to support an increase in precision farming” and help farmers increase efficiency and manage their input costs.
“We also expect that the current inflated prices on the second-hand market for machinery — due to low supply of new equipment — will start to correct over the next 12–18 months as we return to pre-COVID levels of supply,” Mr Onto said.
“The second-hand market and the refurbished equipment market is still very strong, due to these supply chain issues.”
In addition, as land prices cooled, many family corporate farms were on the lookout to expand and competition remained fierce in order to secure land in regional areas.
Farmers invest in agri to improve sustainability
As the use of technology in farming grows, agri-customers are investing in ways to track their sustainability and productivity.
The Commonwealth Bank (CBA) has announced agribusinesses, such as SA Mushrooms, are heavily investing in agritech to improve process monitoring and drive efficiency on the farm.
CBA regional and agribusiness executive general manager Paul Fowler said using sustainable finance options to invest in agritech is can help create "healthier natural capital" while reducing risks and increasing productivity.
Meanwhile, NAB recently partnered with agri-tech Geora to allow farmers to support their reporting covenant under NAB’s Agri Green Loan by utilising Geora’s blockchain technology that integrates the company’s existing sustainability providers.
For example, using the technology will allow a farming company, such as a cattle producer, to track its sustainability activities by storing information using blockchain to highlight its credentials to customers and in green lending.
[Related: NAB's agri-customers to track sustainability using blockchain]
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