Booming Agriculture Sector – How Agri-Businesses Can Manage Cash Flow and Growth
Agriculture is one Australian industry that’s booming at the moment. According to the latest figures, Australian farmers grew over $66 billion worth of product in the past financial year, which was double-digit growth year on year.
Economists believe that market conditions should see the industry crack $70 billion worth of produce this financial year.
Several factors are combing to create great conditions for Australian farmers at the moment, including:
- local and international weather, and
- increasing demand.
Let’s look at the impact of both of these factors in turn.
Australian farmers were suffering through a drought four years ago — with farmers not even able to purchase enough food for their livestock. It seems that it’s now the turn of other parts of the world to suffer the same fate. Unprecedented drought conditions are being experienced all over the world. However, drought conditions have eased in many parts of Australia.
Droughts in the US, Canada and Russia are likely linked to double-digit growth in our exports to those important international markets.
A natural flow-on effect of the current local and international weather conditions is increasing demand for Australian produce. Strong local and global demand for Australian grain, sugar, cotton, meat, wool, fibre, fruit and vegetables is helping to ensure reasonable prices and sales for producers.
Unfortunately, no one has a crystal ball to accurately predict the future. Factors that may adversely affect Australian farmers include:
- access to enough farm workers to fully capitalise on the current boom. The agricultural sector has historically relied on international and domestic travellers for peak harvest times. However, current COVID-19 restrictions on international visas and domestic travel are resulting in the industry struggling to attract enough workers to keep up with demand.
- higher international freight costs and longer transport delays due to COVID-19 restrictions. Australian agricultural exporters are significantly impacted by freight costs due to our geographic isolation.
- a reversal of current weather patterns. History shows that weather patterns are cyclical, but the timing of the cycles is unpredictable. As we come into summer, we can expect to see the land start to dry up.
- any decline in international trade relationships with key markets such as China. China is Australia’s largest export market by far, accounting for more than one-third (35%) of Australia’s total exports. Japan is our next most significant trading partner, but accounts for only 10% of our current exports.
- The Australia/China trading relationship has recently been strained by China putting tariffs on Australian wine and barley, as well as by Australia signing a nuclear submarine agreement with the US and the UK.
- pest plagues such as the current mouse plague that is damaging crops in Queensland, New South Wales and Western Victoria.
- the pace of both local and international economic recovery levels post-COVID-19.
It’s important to capitalise on the good times by managing your cash flow and growth. We can help you to do that at Earlypay in two ways:
1) invoice financing
2) Asset and equipment financing.
Invoice Financing
Invoice Financing is a line of credit that helps you get paid early for your customer invoices. We can arrange for your agri-business to receive up to 90% of the value of your invoices upfront to help improve your cash flow.
Instead of waiting to be paid, you can be paid immediately. You can then use funds to:
- help fulfil customer orders,
- invest in new crops or livestock, and
- pay wages on time.
In addition to unlocking cash from outstanding invoices, Invoice Finance can also include collections management services, allowing you to focus on what you do best – producing and selling more.
Best of all, you don’t have to use any of your other agricultural assets as security for invoice financing. Your invoices are all the security we need.
Asset Financing
There’s never a better time to upgrade your equipment than during the current boom. If you’re in the market to purchase a tractor, ute, harvester, irrigator or other high-value agricultural equipment, asset finance may be a great way to do it. It lets you spread the cost of the equipment over its expected useful life so you can use your cash flow in other areas.
Upgrading your equipment now will help you to increase your productivity to:
- capitalise on the boom, and
- future-proof your agri-business.
You can also take advantage of the federal government’s temporary full expensing scheme. Provided your annual agri-business turnover is less than $5 billion, you can deduct the cost of buying any new assets before 30 June 2022.
We can help you to finance any agricultural equipment you need, and you retain the flexibility to choose your own supplier and brand.
For more information on how Earlypay can help your business with equipment finance and invoice financing arrangements, please contact our friendly team on 1300 760 205 or [email protected].
