NT cattle farmers hold breath for interest rate savings

NT cattle farmers hold breath for interest rate savings

Posted on Wednesday, December 07 2011 at 4:57 PM

The drop in the official interest rate down to 4.25 per cent yesterday may provide some relief to small property holders if the big banks decide to follow suit, however for big landholders with business finance it could mean the ability to continue holding in a climate of slow sales activity.

In the Northern Territory’s top end it would be an even bigger breather for farmers struggling to hold onto their farms following the Federal Government’s temporary cattle export ban to Indonesia mid this year.

Luke Bowen of the NT Cattlemen’s Association said that while the media tends to focus on the urgent need for interest rate cuts for small property holders, the large cattle property holders are often paying significantly higher interest rates – around the 10 per cent mark – compared with small property owners due to being considered a higher risk by lenders.

Anecdotally, because of this high-risk climate, lenders aren’t always as willing to pass the official rate cut down, however it would certainly be the cash injection they desperately need right now if it was passed down, said Bowen.

Cattle property owners are hoping that agricultural finance lenders like Rabobank’s willingness to pass down the full 25 basis point cut on its standard variable rate in November is a sign that it could happen again following yesterday’s official rate cut announcement.

However even if the official rate cut is passed down to NT cattle property owners in the coming week, considering that buyer enquiry and buyer finance is mostly coming from offshore, the interest rate drop isn’t likely to provide a stimulus to these big property buyers.

Herron Todd White’s Terry Roth said that after some months of investor uncertainty, enquiry has started picking up from offshore buyers again as they look for long-term solutions for food security, however this foreign interest is mostly in the larger properties.

“What’s happened is the quality properties with good access to the ports and with good quality cattle suitable to the Indonesian market have held up stronger in value than those properties with poor access to the ports,” said Roth.

“The smaller family operations with under 8000 head of cattle are struggling the most because there’s not as much interest in these properties, there’s more corporate interest in the bigger properties with a minimum of 15,000 head of cattle.”

Their property values have plummeted as a result, said Roth.

“Some properties have seen 15 to 20 per cent drops, however I heard a bloke on the radio the other day talking about a 40 per cent drop on his cattle property,” said Roth.

Bowen said that only one cattle property has been sold since the cattle export ban.

This wouldn’t have been the case if the Federal Government didn’t suddenly place a ban on the NT top end cattle export industry, Roth said.

“The live export ban really threw a spanner in the works this year, reducing investor confidence and weakening property values,” he said.

Five months after the ban was lifted on July 7, cattle exporting to Indonesia has slowly started again, however farmers are still struggling to sell much of their cattle to Indonesia because many of their cows have exceeded Indonesia’s 350-kilogram limit, a limit introduced a couple of years ago, said Roth. “There’s now a huge cattle displacement problem; we’re now hearing stories of farmers having to freight over to other states.

“It’s been a real shock to the cattle supply system, many farmers have basically lost an entire season,” Roth said.

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