Queensland farmers are more in debt than two years ago, but experts say it’s a sign the industry is doing well.
According to new data from the Queensland government, rural debt in 2023 rose to $29.37 billion, up more than 8 per cent from 2021.
Queensland Rural and Industry Development Authority (QRIDA) economist Jon Gillespie said higher prices for agricultural land were a significant factor driving up debt in those areas.
“When you look at the value of land over that period of time, it has increased quite considerably,” he said.
“That would represent probably a portion of the increase in debt.”
The beef industry has the highest share of the debt, constituting 60.95 per cent of the total rural debt in Queensland, as producers buy additional properties to expand their operations.
The practice is referred to as the neighbour-to-neighbour market.
Land values rise
Queensland-based livestock and property agent Andrew Adcock said it was further proof of the confidence across agricultural industries.
“We’ve had rapid growth of prices, we had a very high cattle market, we had cheap money,” Mr Adcock said.
“I think the outlook for the industry is very positive.”
According to Rural Bank’s 2024 Australian Farmland Values report, the median price per hectare in Queensland reached a record high at $8,806 per hectare.
Mr Adcock said producers were willing to take big risks for longevity in the industry.
“We’ve always had people that have been prepared to take risks and ride through the cycles of the industry,” he said.
“The mum and dad market and the neighbour-to-neighbour market is going to remain strong because if people can get funding, they will continue to grow their business.”
The regions with the highest levels of rural debt were the Western Downs and Central Highlands, Southern Coastal Curtis to Moreton, and Eastern Darling Downs.
The beef sector has had the biggest rise in debt, with an increase of $2.54 billion. (Supplied: Raeleen Whip)
Debt ‘is not a bad thing’
The Queensland rural debt survey is conducted by QRIDA every two years due to legislative requirements under the Rural and Regional Adjustment Act 1994 (Qld).
The debt data was taken from major lenders across the state and analysed by the Queensland government’s Statistician’s Office and QRIDA.
QRIDA itself is a lender — the state government body distributes financial assistance programs including loans, grants and rebates to primary producers and agricultural organisations.
But while debt is generally seen as a negative, Mr Gillespie said it was a sign that businesses were investing in infrastructure, equipment and new properties to increase their production.
“Debt is not a bad thing. It can be quite good, providing it’s done effectively,” he said.
“The agricultural industries in Queensland are doing relatively well in respect to the debt level.”
Meanwhile, the cotton and sugar industries recorded the largest decreases in debt, with reductions due to improved crop yields and prices.
The cotton industry paid down $219 million and sugar $178 million in two years.
Queensland’s cotton industry had one of the biggest decreases in debt, with a reduction of $219 million. (Supplied: Alex Russell)
High-quality debt
While there are fewer borrowers than two years ago, the average debt per borrower has risen to $1.75 million.
Not all debt is equal, according to Mr Gillespie, and in the report debt is graded on its quality.
A and B+ grades mean the businesses borrowing the money are viable, have good equity, and have a good return on their investments.
“Lending institutions see that as a quality borrower and it’s a lower risk,” he said.
“We’re looking at 96.35 per cent of the debt that the lending institution sees are pretty secure risk.”
Two factors have improved debt quality in Queensland: higher land prices, resulting in higher asset values, and the value of the products grown and raised by farmers has increased.
Mr Gillespie said the value of agricultural products in Queensland had risen by about 20 per cent in the past few years.
“That is reflected on the ability of the business to service that debt,” he said.
What could change the quality of debt in Queensland is a decrease in the value of agricultural products, and climatic conditions.
“Productivity in the agribusiness sector is linked directly to climate, be it floods, fire or droughts,” Mr Gillespie said.
The next survey is scheduled for December 2025.
