Getting farm finance while retaining female breeding stock

Getting farm finance while you’re growing your breeding stock can be challenging. This period typically doesn’t look great financially because you lose potential income when you hold back female stock to increase your herd/flock or have higher costs if you opt to buy new livestock. Despite this, it’s not impossible to get farm finance if you do your homework.

Many of our clients have difficulty getting farm finance during this time. However, with these simple tips, you can show your bank manager that your business is viable.

  1. Show you have a plan

A plan shows your bank manager you have a strategy guiding your business. The plan should clearly show your farm’s optimal herd or flock size and when you expect to achieve it.

  1. Line up your livestock numbers with your financial statement

Pull together the number of breeding stock you have, with retained female numbers separate from the last five years. These numbers should be presented against your financial statements to show the impact.

  1. Use your livestock schedules to support your growth goals

Your livestock accounts are an important way to back up the herd size you want to get to. This also shows how you will achieve this goal and should match up with your cash flow projects.

  1. More on cashflow

You need to prove you have the cash flow reserves to support your business during the lean years when you’re building your breeding stock by keeping female livestock. Often, this is the time to take up interest-only payments.

  1. Keep it simple

Sometimes you can overcomplicate the information you provide the bank when all you should do is show a clear story on how you’re working toward your goal.

This is a summary to give you general information on how to raise finance when things are lean while building breeding stock. All farming businesses are different, we can help you create a plan and help you present your business when it comes time to raising finance. Get in touch with your local SproutAg representative today to find out more.


What is Agribusiness?

What is Agribusiness? An Overview of the Agricultural Industry

Agribusiness is a term that combines agriculture and business, referring to any commercial activity related to farming and food production, through all stages of the process starting at pre-farm all the way through to retail.

The agribusiness industry is an essential part of the global economy, contributing significantly to the GDP of many countries. In highly industrialised countries, many activities essential to agriculture are carried out separately from the farm. Agribusiness has become increasingly important in recent years due to the growing demand for food and the need to feed a growing global population.

The industry faces many challenges, including climate change, water scarcity, and the need to produce more food with fewer resources. As the world’s population continues to grow, the agribusiness industry will play a critical role in ensuring that there is enough food to feed everyone. In Australia particularly, farming and agribusiness play a significant role in our regional and rural areas, not only having a consequential impact on local economies, but also on the social wellbeing with many agribusinesses embedded and connected within their communities and families.

Definition of Agribusiness

Agribusiness is a term used to describe all the activities involved in producing and distributing agricultural products. It encompasses all aspects of agriculture, from crop production and farming operations to the sale of agricultural commodities, including companies that produce fertilisers and pesticides, farming equipment manufacturers, food distribution companies, and more.

The agribusiness sector includes a wide range of enterprises involved in producing, processing, and distribution of food and fibre products and by-products, as well as cultivated products for consumer use. It is a complex industry that requires a wide range of skills, including farming, marketing, finance, and agribusiness management.

This industry is an essential part of the economy, as it provides food and other agricultural products to consumers throughout Australia and worldwide.

History of the Agribusiness Industry

The history of agribusiness can be traced back to the early days of agriculture, when farmers began to specialise in certain crops and began to trade their surplus with other farmers. As agriculture became more sophisticated, so did the businesses that supported it.

The modern agribusiness industry began to take shape in the early 20th century, as advances in technology and transportation made it possible to produce and distribute agricultural products on a large scale. The introduction of new farming techniques, such as mechanisation and the use of chemical fertilisers and pesticides, also helped to increase agricultural productivity and efficiency.

Today, agribusiness is a major industry that plays a critical role in feeding the world’s growing population. As the demand for food and other agricultural products continues to increase, agribusiness will remain an important and dynamic industry that is constantly evolving to meet the needs of consumers and farmers alike.

Types of Agricultural Production in Agribusiness

Agribusiness is a broad term that encompasses all commercial activities related to farming, agriculture and retail food supply. It includes a wide range of industries, from farming and ranching to forestry and fishing. Here are some of the main types of agribusiness:


Farming is the cultivation of crops and the rearing of livestock for food, fuel, and other products. This includes everything from small-scale family farms to large commercial operations. Farming can be divided into several categories, including: 

  • Arable farming: the cultivation of crops like wheat, corn, and barley 
  • Livestock farming: the rearing of animals like cows, pigs, and chickens for meat, milk, and eggs 
  • Mixed farming: a combination of arable and livestock farming 


Graziers rear livestock on a large scale, typically in a semi-arid or arid environment. Graziers produce animals like cattle, sheep, and goats for meat, wool, and milk. Graziers often manage a lot of land, and have to deal with issues like drought, wildfires, and predators. 


Forestry is the management of forests for timber, paper, and other wood products. Foresters plant and harvest trees, manage forest ecosystems, and protect forests from pests, diseases, and wildfires. Forestry also involves the conservation of wildlife habitats and the preservation of biodiversity. 


Fishing is the harvesting of fish and other aquatic animals for food, sport, and other purposes. Fishermen use a variety of techniques, from nets and traps to lines and hooks, to catch fish in freshwater and saltwater environments. Fishing can be a sustainable industry when managed properly, but overfishing and other environmental issues can threaten fish populations. 

Role of Agribusiness in the Economy 

Agribusiness plays a vital role in the economy of many countries. The sector provides employment opportunities to a significant percentage of the population, especially in rural areas. In addition, it contributes to the overall economic growth of a country through exports and the supply of raw materials to other industries. 

The following are some of the ways in which agribusiness contributes to the economy: 


Agribusiness provides employment opportunities to millions of people worldwide. According to the World Bank, the sector employs approximately 26% of the global population, the majority of which is in developing nations. In developing countries, agriculture accounts for up to 70% of total employment. The sector provides jobs not only in farming but also in processing, packaging, transportation, and marketing of agricultural products. 

Finance & Income Generation 

Agribusiness generates income for farmers and other stakeholders in the supply chain. By providing a market for their products, farmers can earn a decent income and improve their standard of living. In addition, agribusiness creates opportunities for entrepreneurs to invest in processing, packaging, and marketing of agricultural products, which generates income for themselves and their employees. 


Agribusiness is a significant contributor to the export earnings of many countries. Agricultural products such as coffee, tea, cocoa, and fruits are some of the most traded commodities in the world. In addition, agribusiness provides a market for other industries such as manufacturing, which rely on agricultural raw materials. 

Food Security 

Agribusiness plays a critical role in ensuring food security in many countries. By producing enough food to meet the needs of the population, agribusiness reduces the reliance on food imports, which can be expensive and unreliable. In addition, agribusiness promotes the adoption of modern farming techniques and technologies, which increase productivity and reduce post-harvest losses. 

Challenges Facing Agribusiness 

Agribusiness faces many challenges that can threaten the industry’s sustainability and profitability. In this section, we will discuss three major challenges facing agribusiness today: climate change, market volatility, and supply chain issues. 

Climate Change 

Climate change is a significant challenge facing the agribusiness industry. Rising temperatures, changing precipitation patterns, and extreme weather events are impacting crop yields, soil health, and water availability. As a result, farmers are facing increased costs, reduced yields, and greater risks. 

Adapting to climate change requires significant investment in research and development, new technologies, and infrastructure. For example, farmers may need to invest in irrigation systems, drought-resistant crops, and precision agriculture technologies to manage water and nutrient use more efficiently. 

Market Volatility 

Market volatility is a significant challenge for agribusiness. Prices for agricultural commodities can be volatile, driven by factors such as weather, supply and demand, and geopolitical events. This volatility can make it difficult for farmers to plan and manage their businesses effectively. 

To manage market volatility, farmers and agribusinesses must develop strategies to hedge against price fluctuations, such as forward contracts, futures, and options. Additionally, they may need to diversify their operations to reduce their exposure to any one commodity. 

Supply Chain Issues 

Supply chain issues are another significant challenge facing agribusiness. The COVID-19 pandemic highlighted the vulnerabilities of global supply chains, with disruptions to transportation, labour, and processing facilities impacting the availability of agricultural products. 

To mitigate supply chain risks, agribusinesses must develop resilient and flexible supply chains. This may involve investing in local processing facilities, diversifying suppliers, and building strategic partnerships with other stakeholders in the supply chain. 

Opportunities in Agribusiness 

Agribusiness is a rapidly growing sector that presents numerous opportunities for investors, entrepreneurs, and farmers. The industry is constantly evolving, and new technologies and practices are emerging to improve productivity, efficiency, and sustainability. This section will explore some of the opportunities in agribusiness, including technological advancements and sustainable practices. 

Technological Advancements 

One of the most significant opportunities in agribusiness is the adoption of new technologies. From precision agriculture to biotechnology, there are numerous ways that technology can improve productivity and efficiency in the sector. For example, precision agriculture uses GPS, sensors, and other technologies to monitor crops and soil conditions, allowing farmers to make data-driven decisions about planting, fertilising, and harvesting. Biotechnology, on the other hand, involves the use of genetic engineering to create crops that are more resistant to pests and diseases, or that have higher yields. 

Other technological advancements in agribusiness include: 

  • Robotics and automation: Robots can be used for tasks such as planting, weeding, and harvesting, reducing the need for manual labour and increasing efficiency. 
  • Drones: Drones can be used to monitor crops, assess soil conditions, and spray pesticides and fertilisers. 
  • Big data: The use of big data analytics can help farmers make more informed decisions about planting, fertilising, and harvesting, based on data such as weather patterns and market demand. 

Sustainable Practices 

Another significant opportunity in agribusiness is the adoption of sustainable practices. With increasing concerns about climate change and environmental degradation, there is growing demand for food that is produced in an environmentally friendly way. Sustainable practices can also improve efficiency and reduce costs, making them an attractive option for farmers and agribusinesses. 

Some examples of sustainable practices in agribusiness include: 

  • Organic farming: Organic farming involves the use of natural fertilisers and pest control methods, and avoids the use of synthetic chemicals and genetically modified organisms. 
  • Conservation agriculture: Conservation agriculture involves practices such as reduced tillage, cover cropping, and crop rotation, which help to improve soil health and reduce erosion. 
  • Agroforestry: Agroforestry involves the integration of trees into farming systems, providing benefits such as shade, windbreaks, and improved soil fertility. 

Agribusiness presents numerous opportunities for investors, entrepreneurs, and farmers. Technological advancements and sustainable practices are just two examples of the ways that the industry is evolving to meet the challenges of the future. By embracing these opportunities, agribusinesses can improve productivity, efficiency, and sustainability, while also meeting the growing demand for food that is produced in an environmentally friendly way. 

Future of Agribusiness 

The future of agribusiness looks promising, with the industry poised to undergo significant changes in the coming years. Advancements in technology and shifting consumer demands are driving this transformation. Here are some of the key trends that are shaping the future of agribusiness: 


AgTech, or agricultural technology, is one of the most significant trends in agribusiness. The sector is expected to triple in size, with the market worth $12.4 billion in 2020 and projected to reach $34.1 billion by 2026. In Australia alone, there are over 300-400 young startup companies that are seeking game-changing digital technologies to enhance their operations. These technologies include precision agriculture, drones, robotics, and artificial intelligence, among others. They help farmers to reduce costs, increase yields, and improve efficiency. 


Sustainability is another critical trend that is shaping the future of agribusiness. Consumers are increasingly concerned about the environmental impact of food production. As a result, there is a growing demand for sustainably produced food. This trend is driving the adoption of sustainable farming practices, such as regenerative agriculture, organic farming, and vertical farming. These practices help to reduce the environmental impact of food production while also improving the quality of the food. 

Changing Consumer Preferences 

Consumer preferences are changing, and this is having a significant impact on the future of agribusiness. Consumers are looking for healthier, more sustainable, and more ethically produced food. This trend is driving the adoption of plant-based diets, which are becoming increasingly popular. As a result, there is a growing demand for alternative protein sources, such as plant-based meat substitutes. 


Globalisation is also shaping the future of agribusiness. The industry is becoming increasingly global, with more and more food being produced and consumed across borders. This trend is driving the need for improved supply chain management, logistics, and food safety standards. It is also creating new opportunities for farmers and agribusinesses to expand their operations and tap into new markets. 

The Business of Agriculture is More Accessible Than Ever with the Right Financing 

The global role agribusiness has to play is critical for a sustainable future. At SproutAg, we know a big part of ensuring the effectiveness of agricultural production and processes is simplified and stress-free access to financing when you need it most. 

Our specialised team are experienced in agribusiness finance, business advisory, succession planning and all things finance in farming. Contact our team today to learn how we can help secure the financing your agribusiness needs.

Legacy Doesn’t Happen by Accident – Succession Planning Needs Strategic Planning

Legacy Doesn’t Happen By Accident – Succession Planning Needs Strategic Planning

Significant life events can have a profound impact on succession planning, and keeping ahead of them can influence the success of a family’s succession transition. Ideally, the best time to start succession planning is:

  • Before the next generation returns home to the family farming business;
  • Before the next generation introduce a permanent partner; and
  • Before the next generation start their families.

It’s important that the current generation (often ‘mum and dad’) start to lead the succession planning conversation and provide plans and guidelines before these significant life events take place.

Strategic Planning is Vital to be Succession Ready

At SproutAg, we see strategic planning as a key element in our succession ready program. By taking action before significant life events unfold, families can get ahead of challenges that may arise in the future. While the wider impact of these conversations and plans may not be immediate, it’s important to understand that these plans will set out guidelines to ensure a smooth transition from one generation to the next.

Guidelines for the current generation and family leaders to discuss can include:

  • How do family members enter and exit the business?
  • What are the asset policies for the business (working and non-working family members)?
  • If the current generation were to stop working on the farm, how would they retire? Also, if they would like to continue to work, for how long?
  • What are the roles and responsibilities in the business over time?
  • Lifestyle post farm?
  • The business plan around making this all work.

It’s important for families to remember that when making plans and setting these guidelines they are communicated clearly and frequently. It’s not just a one-time conversation for a family to have, particularly if there are changes made to the plans over time.

Having an Imperfect Succession Plan is Better Than No Succession Plan

The team at SproutAg make sure clients understand that sometimes things can change, and that succession plans may change over time. Your plans and guidelines should be set for where you are now. Aiming for perfection and overthinking the significant elements in your business and life can often deter you from undertaking this strategic plan, which would have a much greater impact on your business and family in the long-term.

Succession Planning is a Guide with Many Options, Not Set in Stone Rules

The plans and guidelines you set derive from your own core values, and are often a mix of your background, the family’s story, how you’ve been brought up and your own lived experience. At SproutAg, we believe it is the right of the current generation to set their plans and guidelines and communicate them with their families. We also believe that the earlier you start these discussions, the better the outcome for all involved.

What are the Advantages of Strategic Planning Early?

  • Clarity to all family members.
  • Clarity helps with expectations and also family relationships.
  • Helps the next generation when they are choosing a career.
  • Puts in place a communication program.
  • Allows a business to continue or start to build assets and income to help with the plan.
  • Any plan is better than no plan.
  • Sets expectations for the whole family.

Well-Structured Debt and Repayments

The importance of well-structured debt and repayments. 

As circumstances change, so too must we. Whether it be decreasing the stocking rate during a dry period, or re-structuring debt and repayments as interest rates rise, it is important to be on the front foot to make necessary changes in line with the current situation we find ourselves in. As a producer, it doesn’t matter if you’re located in Queensland or Victoria, or what type of operation you run, knowing how your debt is structured can be critical to your success. At SproutAg, we help a wide variety of producers, in particular those with mixed operations. Lower commodity prices (particularly in the livestock industry), rising interest rates off record lows and higher than normal input costs, means the need to adapt is more important than ever.  

At SproutAg, we understand that the cost of debt is important and can often be one of the higher costs in a business. However, knowing the structure of your debt and ensuring that your repayments match your cashflow is even more important. As a business owner, it is crucial to review not only your current interest rate, but also (and more importantly) the structure of your debt.  

Here are some key things to consider when reviewing your debt: 

  • Is the repayment cycle or interest timing still appropriate for your business? 
  • Do you have upcoming principal reductions? If so, do you know when they occur? 
  • Does your interest only period start converting to principal and interest repayments? 
  • Are your working capital limits still appropriate? 
  • How are you structuring your equipment finance and are you utilising Balloons appropriately to give you more flexibility?
  • Do you have a specific facility to trade livestock or is this connected to your overdraft? 

As interest rates continue to rise, your business may be in a position to pay the higher interest, however it is essential you are also able to pay for principal reductions, particularly when faced with lower commodity prices, rising input costs and the additional capital required to survive a normal season. As a result, your cashflow is critical to ensure you can meet your upcoming repayments.  


Six Tips for Re-structuring Debt and Keeping on Top of Cashflow 

  • Be more cautious when structuring your debt. 
  • If you’re buying equipment and you don’t normally use equipment finance, then you may consider equipment finance this year to improve your cashflow. 
  • If you have a principal reduction coming up or your loan is switching to principal, then get onto this early. Be really well prepared with the right information, and don’t wait until the last minute. 
  • If you don’t have a trading facility in place for livestock, consider one to capitilise on the opportunities available. 
  • Don’t pay cash for equipment if you’re then going to have to extend your overdraft. 
  • Get organised. In a rural property market that may not be as hot in certain areas, it could be a great time to put in place a pre-approval for those acquisitions in the future (don’t wait). 

Livestock Purchases and Instant Assets

Opportunities for livestock purchases, refinancing conversations and discussions around succession have been very topical across the SproutAg offices this month. 

Following a strong Summer and Autumn, many livestock producers are taking advantage of the falling commodity prices and enquiring about livestock finance opportunities. While there is still uncertainty in the sector about when livestock prices (particularly cattle) will reach the bottom, there are still many producers who are seeing the falling prices as an opportunity to build up heard numbers while prices are favourable. In addition to the falling commodity prices, many livestock producers are also enquiring about livestock finance as a solution to meet their working capital requirements for 2023.  

Across the Country, we’re continuing to see interest rates rise to curb inflation. As a result, our team have been facilitating a number of conversations around refinancing whole of bank loans. When comparing interest rates between banks, we’re currently seeing upwards of a 1% difference across the board. This difference is a timely reminder that having a conversation with your bank or lender about interest rates and re-financing can be of great benefit to you and your operation in the long-term. Speak with our SproutAg advisors to find out more about the refinancing options available to your operation.   

For any family farming operations, it’s important to consider and start to put in place some safe-guards and strategies within families as children in their teenage years approach the end of their schooling. With many of our clients having teenage children, the team at SproutAg have been completing a significant number of succession ready services. These services are critical to help current leaders of a family farming operation set up, lead and articulate a long-term strategic succession plan.  

Cash Flow and Instant Assets 

Following the announcement of the 2023-2024 Federal Budget, the team at SproutAg have seen an increase in ‘last minute’ equipment finance enquiries. This increase is a direct result of the changes to the instant asset write off scheme, that finishes as of June 30, 2023. The new budget now offers instant asset write off for purchases between $1,000 and $20,000. The change from the Federal Government has come about with the aim to increase cash flow in businesses turning over less than $10million. The changes as announced in the budget are no unlikely to cover many machinery purchases in the future. With an increase in interest rates, clients have been using equipment finance to assist with their working capital requirements. This year, with rising input costs and lower commodity process, it is critical that producers don’t get caught with a lack of cashflow later in the calendar year.  

A Second Opinion Never Hurt

Seeking out a Second Opinion on Your Banking 

In a market where interest rates are continuing to rise, spending time to analyse the true cost of your business’s finance and compare against alternative options can be difficult, however is a necessary tactic. When it comes to articulating costs and fees, each bank has their own way of approaching a conversation with their client. The language used in these conversations can often be confusing and ambiguous due to the financial jargon used. As a result, it can be hard to understand the true cost of your debt, finance or loans when comparing alternative finance options.  

At SproutAg, we offer a comparison tool that factors in every cost associated and allows our clients to develop a deeper understanding of their true cost of debt. This tool has been designed to give you more visibility, as interest rates are often a lot higher once you factor in all the associated fees.  

Every bank uses their own language when talking about interest rates and associated fees, making it confusing to understand what they’re referring to. Some of the jargon used to describe fees and interest rates across different providers may include: 

  • Unused Line Fee. 
  • Line Fee. 
  • Facility Fee. 
  • Margins (not all margins are the same). 
  • Annual Fees.
  • Negative margins.
  • Package Fees.
  • Base Rates.
  • Reference rate.
  • Corporate Rate 
  • BBSW. 
  • BBSY. 
  • Higher Rate interest. 
  • Different rates between facilities (different rates for term lending and overdraft lending). 
  • Difference rates for various term Loans. 
  • Bill Roll Over Fees. 
  • Variation Fees. 
  • Establishment fees. 


So, if you’re someone who’s hesitant to review your finance because it is too difficult, we encourage you to take the time and compare “apples with apples” and gain a second opinion!  


Debt Advisory Services 

At SproutAg, we know that debt is a great tool for any business to use for growth (when managed well), and based on our analysis we believe that Australian farmers don’t review their banking often enough. * Over the course of a generation, we believe that the average Australian farmer or farming business can save at lease 450k, by reviewing their financial facilities every three years, compared to a farmer or business that is not. Of course, the cost is not the only answer and part of banking that you should analyse, other equally important factors are:  

  • Structure. 
  • Repayment Terms. 
  • Qualilty of your manager. 
  • The Banks/ Providers track record. 

*Based on a $3million loan over 30 years and assuming a 0.5 reduction for the life of the loan, in comparison to a farming business that does not review their banking. 

For more information, please see our Agrifinance guide and talk to your local SproutAg adviser about our debt advisory services. 

Harvesting Legacy: Affordable Farm Succession Planning for Long-Term Prosperity

Harvesting Legacy: Affordable Farm Succession Planning for Long-Term Prosperity

As interest rates rise again and long-term financial planning is more important than ever, let’s look at what you need to think about if you want your farm to go onto the next generation. 

Many family farms have been around for generations, and are the central influence on the values, purpose and history of a family. While you may want this legacy to continue, it’s important to start thinking about succession planning early and understand your farm affordability.  

When we work with a family at SproutAg, there are some key questions that we need to look at to begin helping you with your succession planning:  

  • Does your family want the farm to continue onto the next generation, and is the next generation prepared for this? 
  • What can the farm afford to pay existing owners and non-working family members? 
  • What lifestyle do the existing owners require post-retirement and how much money is needed to fund this?  
  • How much can the farm actually afford and what is a sustainable debt level for you? 

 We often see that the family leaders or existing owners are not clear enough around their intentions and desire to ensure that the family farm continues onto the next generation, or haven’t considered long-term planning for this transition. This is based on their own core values and is up to each individual family, with no right or wrong decision. It is really important that the family starts to assess “farm affordability” in a sustainable year in year out scenario. This means understanding the maximum debt that the farm can take on to remain sustainable while being able to run efficiently.   


So, how does my family’s farm affordability affect me?  

Existing Generation: Get Advice on Farm Affordability Early

SproutAg recommends you seek guidance from a professional to understand your farm affordability using a range of different tools, as this will help you, as the existing generation running the farm, to understand what you can and can’t do financially. You also need to know what you want and the type of lifestyle that you require into the future if you are to exit the farm partially or completely. During this process, SproutAg will run audits of five years of cashflow on your personal expenditure so that you can properly understand your own expenses outside of the business to identify what this lifestyle would cost you. This can take several meetings to help you align your financial planning with your long-term goals, however this is vital for understanding farming affordability and effective succession planning. 

Next Generation: Be Part of the Team & Understand What’s Expected

 If you are the next generation set to take over the farm (i.e. your parents are currently running it), it is just as important for you to understand the farm affordability so you can make an informed decision on what your future might look like. Circumstances may mean that current stakeholders are being compensated at a higher level than is sustainable, where ultimately the farm has to be sold in years of lower commodity prices or rainfall. This can be devastating to the family if the whole intention was to retain the farm in the family. As the next generation, you need to be able to have clear insights into your farm affordability and how to run the farming business at a sustainable level so that you can continue it on. 

Involve Non-Working Family Members & Help Them Understand Farm Affordability

 At SproutAg, we find that often the non-working family members on a farm can feel quite negative towards the next generation taking over the property. In reality, there are usually a lot of challenges that come with gaining equity in the farm such as tenure, inability to sell and often debt to compensate australian white suffolk conference family members. Once the non-working family members have a robust understanding of farming affordability and see that the financial position is often not as strong as originally perceived, it can help them gain a greater understanding and perspective to improve family relationships.  

Cash and Working Capital are King

Cash is King in 2023! 

As you’re probably already feeling, overall profits and, in particular, cash profits, were not as strong as predicted for most agribusinesses last year. Despite rainfall levels being fairly good in 2022, rising input costs and some agriculture commodities tracking backwards meant a hit to the market. While every client, farm and operation are different, 2023 is the year where cash and working capital is King! 

What we are generally seeing across the market is that planning for the year has been pushed back. This is a result of the overall unprecedented cash profit capacity of 2023, driven by factors such as a later than normal harvest and many clients taking longer breaks off work than usual over the Christmas period, particularly being the first Christmas in many years not impacted by Covid. This month’s article will provide you with useful information about cash planning for 2023, and some key focus areas that are we are concentrating on with our clients that might help you too. 


  • Cash flow forecasting system – it’s time for a change.

It’s time for a review of your cash flow system and processes. Is your current system working well for you and appropriate for what you now need? If not, it might be time to update or change it.  

Think about who and what is contributing to your resources and remember that cash flow can quickly become negative when not all working members of the family are contributing to the cashflow. 

When you are trying to forecast your cash flow, remember that most forecasts change constantly so the ability to have a rolling forecast that adapts from month to month is critical. A good way to keep track of the changing forecast is by diarising this in a business calendar and establishing a reference forecast for the year ahead.

Ensure that the working capital for the farm is getting you the right return on investment, and at the right time. If you have a major capital program with a longer payback, there is a risk of it getting delayed, so ensuring you have a higher return on investment project with shorter payback is critical and can help you with forecasting. 


  • Financing and Banking Payments 

One of our key focuses with our clients is reviewing their current payment schedules and amounts. Balloon payments in particular should be reassessed with current interest rate rises, and if necessary, you should look into seeking extensions or restructuring your loan where possible. Plan to go to the bank just once this year and set the right limits from the start. This is important to ensure any additional expenses or potential rises are included so that you have the right working capital limits all through the season. 


Even if you have cash in the bank, having the capacity to preserve more than you think you need is critical to not getting caught short later in the year. We are seeing this trend across a lot of clients, with more and more machinery that is usually paid in cash being financed instead, which preserves cash flow rather than being stuck later and not being eligible for loans. 


Take the time to review all your finances as you plan for the year, ensuring you have more working capital than you need in this very inconsistent market with consistently rising rates. This includes looking at your current payment schedules, and potentially spreading your payments out longer if you have the ability to pay it back. Changing to interest only payments could be an option to improve your cash flow this year too if you can, rather than operating on principal and interest. 


  • Machinery Capital Planning Tools 

Machinery can be one of the biggest expenses that impacts your cash flow. Taking a proactive approach to planning your upgrades and replacement to equipment in a cost-effective way can prevent you getting caught out when you can’t afford it. SproutAg has a Machinery Capital Planning Tool which can help you determine what is strategically required in the next three years and assist in your proactive planning. You can also assess your return on investment and decide the best option for you with our Contracting or Ownership Comparison Tool.


Another way to get on top of your planning is to compare the usage of your machinery to industry benchmarks and understand the overall effectiveness of your equipment to make informed decisions.  


With so many changes happening and predicted to happen in the financial market, it’s important to prepare and plan your cash flow, which might look slightly different than previous years. Most importantly, be flexible in your approach as the industry, the economy, and predictions will constantly change, and remember – cash is king! 


If you have any questions, please reach out to your nearest SproutAg adviser. 


Inflation and working capital

In 2021, disruptions in supply chains and increasing inflation have made headlines across the world. These disruptions in the supply chain are having two impacts; increased cost of production and few goods available for people to buy. The flow on from this is an increase in price for goods, which is driving inflation and why the recent US CPI increase is at an almost 30 year high.

Australia is no different with the ABS announcing CPI had increased by 3% over the last 12 months ending September 2021. So, what impact does this have on your farm?

Working Capital Accounts

Cash flow is the lifeblood of any business, something challenged with continual price rises that cause you to revise your budget. In addition to this challenge is the lack of certain inputs, like urea, you need to operate your business causing disruptions.

In the case where you know an input will be difficult to buy it’s a good idea pay close attention to them, purchase up extra quantities so you have it on hand when needed. This strategy will mean you can continue to operate but it will cost more as you buy in larger quantities.

Five Tips.

  1. Work harder on your return on investments to get the most out of your assets.
  2. Look at your expenses across the whole business, prioritise them and put more focus on expenses in general so you are only spending on what adds value.
  3. Increase the majority of your expense items and make sure you have a strong understanding of your working capital position in advance.
  4. Plan increases to your cash or credit lines that can be used against your expenses in advance.
  5. Plan for delays in supply chains as they’re not likely to ease soon so you can calculate how much inputs you need to purchase.

By following these steps, you can manage the speed bumps that come along with inflation and supply chain delays to keep the farm running efficiently.

When it comes to bank finance preparation is vital

If you want to be able to buy the right place in today’s property market, you need to be organised and prepared. When working with our top clients who intend to buy farmland in 2023, we start working with them in early 2022. This is because the current seller’s market with land prices rising significantly across all markets in recent years have meant success relies on a person being prepared and agile to be successful.

Considering settlement is around 40 days, an auction or expression of interest period can be as little as six weeks the ability to have your finance in place can be the difference between you buying the land or missing out.

Another factor, we’ve noticed is the reactionary nature of purchases as people tend to be too busy working in the business to think through what they need to do and start working on. Two main factors for this are:

Lack of time

The day-to-day operation of a farm can often take precedence over the preparation needed to take on the next acquisition. It can be easy to underestimate the work involved in obtaining finance and the time needed to find out the right information. You should also consider getting a second opinion when getting financial advice.

Agri-finance is also inconsistent and complicated meaning it can be time-consuming when you are trying to find out information. We’ve seen inconsistency right through from obtaining credit, to structuring and pricing.

Understanding bank requirements have changed

Gone are the days when you turn up the bank and secure finance based on your loan to value ratio (LVR) and equity position alone. Instead, cash flow and showing you can repay the debt is critical for raising finance.

Banks look at your ability to repay your finance even when interest rates rise against your cash position in order to make a decision. Equity is also important to want to continue to lend and provide help should you require additional working capital.