YOUNG cattle producers are using residential home loans and other alternative funding sources to buy their first farm because financing for agriculture has become too difficult in Australia.
In south Western Australia, 20 kilometres from where mining entrepreneur Andrew "Twiggy" Forrest bought into cattle operations this year, 30-year old Blythe Calnan and her partner Greg have just purchased a 40 hectare cattle fattening farm and leased 400 surrounding hectares.
"We originally started looking at bigger properties – about $1 million – but it was difficult. The finance just didn't work," Ms Calnan said.
"So we re-strategised and bought the biggest property we could under a residential loan which gave us much better interest rates and much better equity rate. Then we used the cash we had left over to develop our business."
Speaking at a Future Farmers Network forum in Roma, Queensland, Ms Calnan said that buying her "first piece of dirt" had been a difficult exercise but that her confidence was lifted when she heard Andrew Forrest had bought in.
Other young farmers like Ms Calnan have also taken on alternative sources of funding such as the Queensland government's First Start Loan which since 2009 has seen 439 approved farming loans totalling $168 million.
Phillip Crocker, 30 years old, and his wife Shannon took on a loan this year to buy a 360-hectare property west of Roma.
"With the First Start Loan we get a lower interest rate than the bank and they are much more flexible than a bank loan,' Mr Crocker said. "There are no early payment fees for example."
"There is a fair bit of paper work and the requirements are onerous but it works out better."
Both Mr Crocker and Ms Calnan also said that foreign investment's increasing role in helping to support new farms was healthy and a necessity.
"It's pretty hard to say no to foreign investment," Mr Crocker said. "It's bound to happen and we have to do something to lift the profitability of Australian farming."
In a poll taken during the Future Farmers Network's recent young beef producers forum 52 per cent of respondents thought Australian farmers should embrace foreign capital.
Australia's big four banks dominate agricultural lending with their exposure to agriculture in the September quarter at more than $107 billion.
While banks have been encouraging young farmers to enter the sector they have also been cautious with several banks holding on to more than $1 billion in impaired loans from farms hampered by tough conditions and poor risk management.
Australian Agricultural Company employee and operations manager for the famous Brunette Downs cattle station Steven Pocock is one young farmer who has decided against taking on any big agricultural loans.
He thinks buying a farm at a young age involves too much risk and has instead started buying residential properties with his brother.
They plan to buy a house each year for the next ten years.
"We just know that you can't go out and buy a farming business from the get-go.
"The bank probably won't give you the money but really do you know how to run the business at that age anyway?"
