New commercial lending to the agriculture sector surged to a six-year high in January, according to Australian Bureau of Statistics data, amid improving farming conditions and growing appetite from local and offshore investors.
For the year to January, new lending to the agriculture sector totalled almost $22.7 billion compared with $20.2 billion a year ago and less than $18 billion three years ago. By contrast, new lending to the mining sector has fallen about 30 per cent over the past year.
"Mining has fallen from favour, to be replaced by the agriculture sector," CommSec chief economist Craig James said.
"The lift in lending coincides with renewed interest in the sector from overseas investors and expectations of stronger Asian demand for Aussie food and beverage products," Mr James said.
Mark Bennett, head of agribusiness at ANZ, said lending activity had picked up "noticeably" compared with previous years in sectors like grains and mixed farming given low interest rates, the weaker dollar and better commodity prices.
"Farmers have been consolidating debt, being cautious, paying down their overdrafts and waiting for the right opportunity to borrow more. There's now a number of farmers in the market who believe it is a reasonable time to invest again," Mr Bennett told the Weekend AFR.
He said a relatively strong wheat crop and average-to-better conditions in many wheat growing regions had given farmers a bit more confidence to invest again.
But the appetite for new lending was still "not there" in the beef sector, despite high commodity prices, because of the continued drought in North Queensland.
"The total amount of agricultural debt has been stagnant for the past five or six years."
In its latest Rural & Agribusiness Outlook Report, released this week, Colliers International said the sector was "undergoing a revolution as investors begin to recognise the industry's long-term potential" and as "macro-economic conditions improve farm gate returns".
"Investors are drawn to rural and agribusiness assets in pursuit of stronger yields, as the market becomes short of opportunities in traditional asset classes," Shane McIntyre, national director at Colliers International, said.
"The spotlight this year is on beef, cotton and water sectors."
