Dumbalk North dairy farmer seeks better financing models to get new blood into dairying

A search to find how countries handle financing young farmers has led Dumbalk North dairy farmer and Nuffield Scholar Damian Murphy around the world, giving him an insight into what needs to change domestically

As part of his research Mr Muphy he study took him to Europe, USA, Canada, Brazil and New Zealand to meet with banks, financial institutions, government departments and organisations involved in policy and advocacy for young farmers, opening the door to a productive period in dairy industry advocacy.

Although farm finance and providing an affordable pathway for new farmers is still an issue the industry grapples with, Mr Murphy was able to use his study experience to highlight the need for new financial models to assist young and beginning farmers.

In Canada he discovered a loan program from Farm Credit Canada called Transition Loans.

“When a young farmer buys land, Farm Credit Canada guarantees the vendor of the property will get the proceeds from the sale of the land directly from FCC over five years. The buyer financed by FCC does not need a down payment and only pays principal and interest or interest only on the amount that has been paid to the seller,” he said.

“The advantage to a start-up farmer is he or she only pays principal and interest on the amount paid to the owner in that year. So, if the purchase price is $500,000 in the first year the owner gets $100,000 of his $500,000 and the young farmer is only paying principal and interest on that $100,000.

“That helps a huge amount with cash flow and that’s what is really key to a young farmer; just protecting that cash flow situation.”

Mr Murphy believes a bank should take on this transition program in Australia, but also sees merit in setting up a co-financing program where money from agriculture that is in farm management deposits or superannuation is invested back into agriculture to assist young farmers with equity requirements.

“To get into agriculture and progress through you need stock, lease agreements, machinery – anything that’s fairly manoeuvrable - right through to land purchases. Wherever the young farmer wants to go, I’d like to see them supported and encouraged with finance, not excluded,” Mr Murphy said.

“I can see that it’s getting harder and harder for the next generation to have the combination of skills and finances to progress in agriculture.

“Some of the best farmers I know and have seen around the world don’t have that family farming background and they should be encouraged.

“In all agricultural commodities we must encourage young and beginning farmers into the industry and provide a path to progress through – because older farmers have a huge amount of assets in agriculture and they’re going to have to get passed on in some way at some stage. If the young farmers aren’t coming through in a position to buy that asset or manage that farm then we as an industry have failed

Despite these concerns, Mr Murphy is upbeat about the future of the dairy industry and is encouraging farmers to consider applying for a Nuffield scholarship.

“It has an enduring benefit; especially with the connections made and the understanding you get of the whole package that agriculture provides in Australia,” he said.

“Young farmers need to learn as much as they can; ask questions, get good professional advice and find a good mentor, and definitely consider a Nuffield. If they have questions about an interest of theirs in agriculture, the answer might not be in Australia.

Applications for the 2021 Nuffield Scholarships are now open and will close on September 11. For more information, visit: gardinerfoundation.com.au/nuffield