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Interest rates remain on hold - farmers look to spring

18 September 2012

The National Farmers’ Federation (NFF) has today released the September Agribusiness Loan Monitor, showing that agricultural interest rates have again held firm, in line with the Reserve Bank of Australia’s decision to hold rates at 3.5 percent for the third consecutive month.

NFF Economics Committee Chair John McKillop said that only one bank moved its agricultural business rates during the last month, according to the Monitor, with ANZ increasing its business loan variable rate by 0.02 percent.

“This results in this month’s Monitor come as no surprise: it’s unlikely that the banks will move rates much now until the next RBA cut; widely predicted to occur in November,” Mr McKillop said.

“And, while interest rates and associated financial market movements, like fluctuations in commodity markets, can underpin confidence in the agricultural sectors, it’s the role that local weather conditions play at this time of the year that generates production and revenue that really drives the returns on farm.

“Farmers have experienced different starts to spring across the country. In WA, winter crop production is expected to be lower than last year’s record harvest, due to the dry conditions. Similarly, in parts of southern NSW and northern VIC, low winter rainfall, frosts and a dry start to spring mean crops need a boost from spring rain to kickstart growth as the warm weather arrives.

“Meanwhile in other parts of the country, thing are looking more positive: in northern NSW and QLD, crops are expected to yield well due to primarily good seasonal conditions. Yet the threat of dry conditions to come, with the continued predictions of a return to El Nino, remains in the minds of many farmers.

“The next two months are critical for agricultural production, which is why risk management is now an integral part of every farm business, and the various financial instruments available to farmers to manage this play a vital role at this time of year.

“The focus for Australian farmers now remains firmly on the season ahead from both a production and a financial perspective, and fingers are crossed for a great spring,” Mr McKillop said.

The Agribusiness Loan Monitor is compiled by leading money market monitor Canstar and published by the NFF. The September Monitor is available here, along with all previous editions.

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