While drought has given many farmers a prolonged whacking and sent average Australian farm profits into negative territory for the first time in 10 years, producers are generally keeping the farm debt monster under control.
Thanks to record low interest rates and strong rural land prices, broadacre farmers have, on average, increased the equity they have in their farmland, and total national rural debt has grown only slightly.
Even in the hardest hit drought states of NSW and Queensland equity levels have mostly improved.
Ten years ago the average interest cost as a proportion of net farm income was 30 per cent. Now it's 20pc
- Peter Gooday, ABARES
Although debt in 2019-20 was made more difficult by drought pressures, chief commodity analyst with Australian Bureau of Agricultural and Resource Economics and Sciences, Peter Gooday, said overall Australian farmers were enjoying low debt servicing costs as a proportion of their earnings.
Low interest rates and robust broadacre farm profits in certain states and certain commodity sectors had helped keep debt servicing ratios historically low across the industry.
"Ten years ago the average interest cost as a proportion of net farm income was 30 per cent. Now it's 20pc," Mr Gooday told last week's Outlook 2020 conference.
However, drought-bitten NSW was definitely feeling much more repayment pain.
About 70pc of the depleted net farm income generated in the state was being chewed up by debt repayments.
That compared with a slight dip to 30pc in Queensland and just 10pc in Victoria and West Australia.
On the farm income front, almost all NSW, parts of northern Victoria, north eastern South Australia and southern and western Queensland were expected to endure farm cash incomes at least 25pc below the average for the past decade, after farmers deducted operating costs.
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However, a significant improvement for much of northern and central Queensland and parts of Victoria will see cash returns in those areas jump to about 25pc above the 10-year average, partly fuelled by livestock sales and lucky crop results.
In fact, ABARES expected Victorian farm cash receipts for 2019-20 to hit their highest average in more than 20 years, largely because the state enjoyed good cropping season rain.
Yet, drought continued to undermine real farm profits nationally.
After making adjustments for family labour costs, capital depreciation and big livestock culls and reduced grain and fodder inventories, farm business profits are set to sink to about negative 20,000 in 2019-20 - down from about $125,000 in 2015-16.
Farm profits previously fell into similar negative territory in 2009 and even further into the red (about minus $100,000) in 2006 because of the millennium drought and poor commodity prices.
In droughty NSW, current financial year farm profits are forecast to fall to record low levels around minus $150,000 - well down on the 2016 peak of $105,000.
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Andrew Marshall
Andrew Marshall is the group agribusiness writer for ACM's state agricultural weeklies and websites. He is a former editor at The Land and has worked in various Rural Press group roles in Canberra, North Richmond (NSW) and Toowoomba (Qld).
Andrew Marshall is the group agribusiness writer for ACM's state agricultural weeklies and websites. He is a former editor at The Land and has worked in various Rural Press group roles in Canberra, North Richmond (NSW) and Toowoomba (Qld).
