At least 80 significant farming operations across Australia are in receivership or in distress.
More operations may collapse due to high costs, diminishing income and declining land values.
The AFR said it did a survey of the country’s top seven major insolvency specialists in light of federal Treasurer Wayne Swan announcing a new $420 million subsidised loans package on Saturday for farmers in debt.
“Viable farmers are struggling under the weight of a high dollar, and of course reduced land values,” Swan said.
“We understand how important it is to get access to concessional loans and that’s what this package does.”
Independent MP Bob Katter backs the proposal but said farmers should benefit from it directly.
“Banks were lending irresponsibly- $20 million was being paid for cattle stations where you would be lucky to get $200,000 in revenue – it was never going to be viable,” he said.
Insolvency specialists are predicting more farming operations will go into receivership as banks begin to make difficult decisions on farms in the beef, dairy, cropping and horticulture industries.
Farmers expected to revalue their property under loan requirements are facing major cuts in value. This could mean a blow out in their loan-to-value ratios.
Many loan contracts stipulate that if a loan-to-value ratio is violated, or if debt serviceability is damaged, the lender can bring in severe penalties of 3 per cent or more on each loan.
Many properties that go into receivership have sold for a fraction of what they were previously worth or bought for.
An example is Cubbie Station, previously in administration with McGrathNicol, which itself has more than 20 appointments in the agricultural industry.
The original price of the 92,000 hectare cotton farm in south west Queensland was $400 million. However, with debts of ore than $420 million, the farm eventually sold to a Japanese and Chinese consortium this year for $230 million.
Kingower, a well-known, family owned mixed farming station in Emerald, Queensland, went for about $5 million earlier this year.
But the 3300-hectare property, which was handled by Ernst & Young receivers, was purchased during the boom for more than $10 million.
Ernst & Young administrator Justin Walsh said agricultural property values rose from year to year until they arrived at level that was unsustainable.
“This was fuelled by huge debt loads being carried by farming enterprises across the sector. Around three years ago the year-on-year increases in property prices stopped and since then values have fallen dramatically.
“What this means is that anyone who has bought into farming land over the five years before 2010 now probably has a negative equity position,” Walsh said.