Recent data from the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) offers an insightful glimpse into the financial health of livestock producers across Australia.
The overarching conclusion is that the industry is financially robust, thanks to several strong years, even in the face of recent market fluctuations in livestock.
Sheep Farming: A Case of Financial Resilience
Sheep producers have consistently performed well over the past few years, using this period of prosperity to bolster their financial standing.
They boast the highest equity ratio among all surveyed farm types at 95%, coupled with the lowest farm business debt, which stands at $329,000. This strong financial position provides a cushion of confidence for the industry, particularly as lamb and sheep prices have recently softened.
Further underlining this financial resilience are Farm Management Deposits (FMDs). These allow producers to earmark pre-tax income from primary production activities during high-income years. Sheep farmers have effectively utilised FMDs to build financial buffers, with average FMDs in New South Wales and Victoria standing at $100,000.
Beef Farming: High Income but High Debt
Beef cattle producers have seen their highest average farm cash income in seven years, amounting to $238,000 for 2022-23. However, their average equity ratio is a commendable 94%, but the absolute farm cash debt is a rather high $570,000.
This is concerning when compared to average liquid assets of $247,000, indicating that a larger proportion of total assets are non-liquid, which could pose challenges in the event of short-term financial strains.
On a brighter note, FMD accounts for beef producers are robust. The largest FMD accounts are in Queensland, averaging $178,000, followed by New South Wales at $55,000 in 2023.
Mixed Farming: High Income but High Debt
Mixed farming systems have also fared well in 2022-23, with an average farm cash income of $400,000 and liquid assets amounting to $248,700.
However, these operations are more susceptible to input cost pressures, leading to a relatively high average farm business debt of $1.3 million. This could be problematic if liquid assets are insufficient for repaying non-current assets.
Future Outlook
Overall, the data suggests that livestock producers have judiciously used the past few years to reduce debt and increase equity. While the proportion of non-liquid assets remains a concern, especially in the face of short-term cash flow issues, producers are generally well-positioned for the coming years.
