2012 Scholar, VIC
It’s an ever-present issue – how to deal with the ageing farming population and make it possible for young enthusiastic farmers to enter the sector. Dairy farmer Damian Murphy believes that thanks to a scholarship, he may have found the solution.
“I’ve seen people come into the industry and they’ve just found it so hard to get finance for things that would allow them to grow their asset and progress in the industry – it is becoming a real hurdle, and almost exclusive.
It was almost a case of you could only get a start and continue in agriculture if you had the family farm or the family connection to keep on going through and I’d like to see that change,” he explained.
He investigated what young farmer finance schemes exist around the world particularly in places where land is more tightly held than in Australia.
“That’s one of the key things we had to look at – if we don’t have that manoeuvrability, how do young people keep on coming through?
They might start on a share and progress through onto a lease and maybe a marginal farm or something like that – in places like Ireland and France they don’t have that option, whereas in Australia we’re lucky we still have that option,” Damian says.
Perhaps surprisingly Damian found in France that unlike Australia, a significant percentage of farmers previously did not have a connection to the farm – in other words they were startup farmers.
“They do have a very different system to us, and yeah a lot of money flows in from the EU. When I sat down with the French young farmer group and asked them, the answer was 30 per cent do not have that connection to the land and I think that’s a terrific stat. However it costs a lot of money and I think we can do it better than that.
It was in the USA where Damian’s big find came, when he discovered a loan program from Farm Credit Canada called Transition Loans.
“How it works is when a young farmer buys a property, Farm Credit Canada will go as guarantor for the money that’s outstanding to the existing owner of the farm. So over five years, Farm Credit Canada will guarantee that owner will get his money for that asset – so if it’s a $500 thousand farm, they will get paid $100 thousand each year from Farm Credit Canada. Now the advantage to me as a start-up farmer is I only pay principal and interest on the amount outstanding to the owner. So in the first year the owner gets $100 thousand of his $500 thousand and as the young farmer I’m only paying principle and interest on that $100 thousand. 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,” he explained.
He 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 is invested back into agriculture to assist young farmers with equity requirements.
“I mean get into agriculture and progress through, so I’m talking 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 if that’s how they see they want to go,” Damian observed.
Damian says after travelling around the world on his Nuffield scholarship, he holds grave concerns for the future of Australian agriculture without a viable entry system for young people.
“I think what you’re going to find, and what I found through my research in the EU, is they’ve got such an old ag population that it’s really going to hinder them in the next 10-15 years if it’s not hampering them now.
We’re in the same situation, something is going to have to happen with young farmers coming through in the next 10-15 years or we’re going to end up with a very old farmer population. We have to find some way of manoeuvring that through encouraging young and beginning farmers into the industry to progress through – because these older farmers have a huge amount of assets in agriculture and they’re going to have to get passed on in some way somehow at some stage and if the young farmers aren’t coming through and in a position to buy that asset or progress through or manage that farm, the value of that asset will reduce and that’s not good for anyone,” Mr Murphy concluded.