Rabobank took the Australian ag lending market by storm a few years ago, fueling momentum to enter the US fray.
The historic drought is changing the picture Down Under, however. Rabobank officials credit a rise in farm debt to consolidation.
The consolidation of farming land into fewer hands has pushed up farm debt to a record high of $44 billion, rural lender Rabobank Australia said today.
The bank said the rate of debt was increasing by seven to nine per cent per year as land prices continued to rise.
James Robinson, Rabobank rural state manager in South Australia, said farms were getting bigger as owners borrowed to buy or lease the land of neighbours who retired or left the industry. [More]
This could be true. Frankly, I think it is about the disastrous farm income picture.
Government forecaster, the Australian Bureau of Agricultural and Resource Economics (ABARE) said in its latest farm survey results that farm cash incomes on average are projected to be $26,600 for 2006-07, down from an estimated $81,290 in 2005-06.I think that's the spin I would put on it. However, lenders could even be more than a little involved in moving bad paper to the not-so-bad file by encouraging still-solvent farmers to buy out the strugglers.
ABARE said this was the largest fall in farm cash income recorded since it started the survey 29 years ago. [More]
Always remember, lenders tend to be "deeply committed" to apparent winners, not all borrowers.