Vegetable growers’ debt levels almost triple
The average total debt by Australian vegetable growers is estimated to have almost tripled over the seven years to 2011-12, according to data released by the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) today. ABARES conducts an annual survey of Australian vegetable growers, with the results of the latest survey covering data collected in 2011-12 and 2012-13.
The worrying trend is that Australian vegetable growers total debt remains high over the long term, particularly since debt levels were only approximately $170,000 in 2005-06.
“In 2011-12, the majority of accumulated debt appears to have been related to increasing production, with approximately two-thirds of Australian vegetable growers’ debt being used to purchase land or working capital. The remaining debt was largely related to purchasing buildings and plants,” said Mr Hermann.
“In positive news, Australian vegetable growers’ average total debt was $489,300 in 2011-12, approximately 17 per cent lower than the previous year,” said Mr Kurt Hermann, AUSVEG spokesperson.
AUSVEG is the leading voice in Australian horticulture, representing 9,000 vegetable and potato growers. The Australian vegetable industry is estimated to have generated around $3.6 billion for the Australian economy in 2012-13, playing a critically important role in contributing to both regional and Australian economies.
“In addition, the interest-to-receipts ratio has also increased to 4.7 per cent in 2011-12, compared to around 3.1 per cent in 2005-06. A lower interest-to-receipts ratio means growers have greater capacity to service their debts. This demonstrates that vegetable growers back in 2005-06 were more comfortable in servicing their loans compared to 2011-12,” said Mr Hermann.
In 2011-12, New South Wales vegetable growers had the lowest average interest to receipts ratio at 3.3 per cent, whereas Tasmanian growers had the highest at 8.1 per cent.
“Smaller vegetable growing farms, in terms of financial performance, are less likely to service their debts, even though they have much lower debt levels compared to larger growers. Vegetable growers in the bottom tier, ranked by rate of return, had a much higher interest to receipts ratio of 10 per cent relative to those ranked at the middle and top tiers at 6 and 3 per cent respectively,” said Mr Hermann.
“These findings illustrate that vegetable growers are finding it more difficult to service their debt, when compared to 2005-06, however, smaller operators appear to be the most at risk,” said Mr Hermann.
“Despite the difficult conditions for smaller growers, medium and larger operators are generally achieving better returns and have greater capacity to service their debts,” said Mr Hermann.