Livestock Finance in Focus: Spring Surge Brings Opportunities and Risks

With seasonal feed availability on the rise and livestock markets strengthening, understanding your livestock finance options is key to making timely and profitable decisions.

As we settle into Spring, the number of enquiries for livestock finance generally increases. With the end of winter cropping becoming more predictable and the prospect of a good season on the horizon, many graziers look to take advantage of the feed available. In addition to this, we traditionally see that livestock markets are stronger in the Spring and coming into Summer in comparison to crop commodities. 

We understand that the cost of running a farm or any business is high, and that it’s important to take advantage of opportunities when they present themselves. This is true for obtaining livestock finance to take advantage of the available feed as we move into a prosperous season, which can result in a profitable outcome. 

At SproutAg, we understand that profitability in a livestock business is made when you buy at the right time and for the right price, and this is made possible when your finances are prepared in advance. 

There are four main options when looking to raise livestock finance, and there are pros and cons to each.

1. Dedicated livestock financier.
2. Stock and station agent.
3. Main bank financing.
4. Cash in the bank.

*The following commentary is general in nature and does not take into consideration personal business circumstances.

Dedicated Livestock Financier

Pros

• Quicker turnarounds.
• Dedicated facility.
• Easier to get approved.
• Frees up security for the main bank.

Cons

• Higher interest rates at 12-14%.
• It can be complicated from an ownership perspective.
• 12-month term only at times.
• Right to mortgage parameters in documents.

Stock and Station Agent

Pros

• Easy to get approval.
• Dedicated facility.
• Frees up security for the main Bank.

Cons

• Have to market stock through an agent.
• 12%+ interest rates.
• Funding can be unpredictable and based on the agency’s own cash flow.

Main Bank

Pros

• Cheaper rates of 5.50-6.50%
• Cleaner with one financier.

Cons

• May use valuable land security.
• It can be more restrictive, and the bank may not be able to use security.
• May not be able to access.

Cash

Pros

• Easy to access.
• No interest rate unless out of your own overdraft/ term loan.

Cons

• Does this impact other parts of the business?
• Is the cash required in the future for the business?

Want to understand your risk and get support – reach out to the Sprout Team!