Despite 12 consecutive interest rate rises in the past year, bankers believe farmers are generally more bothered by the weather and lower commodity markets than bank loan repayments.
However, soaring farm input costs, including rates, have prompted a rise in producers seeking better borrowing deals, even before official Reserve Bank of Australia cash rates began lifting from a 16-month record low of 0.1 per cent.
The good news from finance sector analysts is that frequent predictions of at least one more rate rise this year now seem far less likely to eventuate.
However, market forecasters were not too confident about rates falling until late next year, and plenty of pundits continued to expect one more pre-Christmas rise.
About two-thirds of economists recently surveyed by comparison website, Finder, were more optimistic that RBA interest rates had peaked at their current 4.1pc.
"Farmers are getting more cautious, particularly as quite a few are waiting for rain," said ANZ Banking Group's NSW agribusiness manager, Alister Bennett.
"The fact that economists have been uncertain about their rate expectations and the economy has created extra uncertainty for customers - but the general mood on rates is certainly not devastated.
"Yes, they are thinking about loan costs, but they're also thinking holistically about business risks like the weather and the way beef, lamb and wool prices have slipped this year."
"Many families have previously seen interest rates which were typically far higher, especially in the 1980s and '90s."
Indeed, in the past 33 years since Australia's official rate hit a record 17.5pc peak in early 1990, it has averaged 3.84pc - marginally lower than today.
Westpac Banking Corporation's national agribusiness lending head, Ansgar Vogt, noted current commodity and financial markets and seasonal anxiety had pushed farmers "into a bit of a stocktake period", after a "very good three years".
However, there were few signs of a slowing farm sector appetite for borrowed money.
"Ag sector lending grew to more than $110 billion last financial year," Mr Vogt said.
"I certainly don't expect to see current lending or market conditions result in zero lending growth in the year ahead. It continues to increase."
In the global scheme of things he said Australian agriculture and rural property values were in very good shape and supported farmer borrowing intentions, with farm family succession and scale strategies invariably driving farmland expansion and finance plans.
"I doubt if current interest rates are high on the worry list for family farmers if the property next door comes up for sale and they're looking to scale up," he said.
Westpac tipped RBA rates to stay at 4.1pc for 12 months before cuts were likely.
ANZ and Commonwealth Bank of Australia have also predicted no more rate rises before year's end.
However, while the RBA board's September 5 meeting was now almost unanimously expected to hold interest rates for the third month running because of slowing inflation and a weakening national economy, National Australia Bank tipped one more hike to 4.35pc, probably in November (although it noted an increasing likelihood that interest rates may have already peaked).
Expectations of another rise were shared by more than half the respondents to a Reuters poll of 35 prominent money market economists ahead of this week's RBA meeting.
In a warning to producers about consumer spending and potential farm cash flow risks ahead, NAB's latest Rural Commodities Wrap also forecast Australian economic growth at just 0.5pc this year - the slowest pace outside the pandemic since the 1990s.
"We have pushed back our expectation for rate cuts to August 2024, with the cash rate to return to around 3pc by early 2025," the bank's economic analysis team reported.
ANZ's spring Agri InFocus Report was also cautious about the national economy, saying a hard landing looked unlikely as inflation eased, but per capita gross domestic product growth prospects remained "very weak", falling 1.5pc in 2023 and growing just 0.1pc in 2024.
"If interest rates change in the next 12 months, they'll go up, not down," the InFocus report said.
"Our base case is that while there are no more hikes, there will also be no cuts until late 2024.
"We wouldn't rule out the prospect of higher interest rates given additional monetary tightening may be required to reassure the RBA board that inflation will return to within the 2pc to 3pc target band."
ANZ's Mr Bennett said there was definitely more "rate shopping" in the farm lending market than 12 or 18 months ago, partly because producers were looking at their cash flow and all farm costs, including higher prices for fuel, farm chemical, fertiliser, machinery purchases and electricity.
"But it tends to take quite a bit to nudge people to change lending institutions," he said.
"We work with our customers monitoring all the variables impacting their business, and their risk management options, to manage seasons and commodity cycles."
Westpac's northern NSW regional general manager, Hank MacInnes, noted agricultural banking was not about reacting to single year trends.
"Livestock prices move around all the time, cotton and grain prices still look good on long term trends and interest rates are close to their long term average," he said.
"There are always challenges to work with, but the long term play for farmers is still very productive.
"We don't get too excited by one year's movements."
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).
