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#034 - Buying Grass, Not Dirt: When Season Drives the Market · Dollars In The Dirt

• 0:00
  If you're borrowing a property just for fee, is it a smart move or a very expensive short term fix?
• 0:05
  Right now, property decisions aren't being driven by spreadsheets. They are being driven by rainfall
• 0:10
  maps across parts of southern Queensland and New South Wales. Producers aren't chasing expansion.
• 0:16
  They're chasing grass. After helping hundreds of farmers secure over $1 billion in finance, I can
• 0:21
  tell you that buying a multi-million dollar asset purely on desperation is the fastest way to
• 0:26
  destroy your balance sheet. So in this video, I'm going to break down why the market has shifted
• 0:30
  from buying dirt into buying grass and the hidden costs of this strategy, and how to use your
• 0:34
  finance to give yourself breathing room when the season turns against you. The first thing we need
• 0:39
  to understand is the massive seasonal divide driving the current property market. We're seeing
• 0:44
  strong conditions in the north, but feed is tightening rapidly in the south and when the rain
• 0:49
  stops, the phone started ringing. Producers are looking at their paddocks and they're looking at
• 0:53
  their cattle breeding herd and then realising they're running out of time, they don't just want
• 0:58
  to sell decades of carefully selected genetics and have to start all over rebuilding when the
• 1:04
  season breaks, so the demand shifts. They stop looking for properties that offer long term
• 1:10
  strategic value, and they start looking for anything that has standing feed. And they're
• 1:15
  buying grass, they're not buying dirt. And we're seeing producers willing to move cattle hundreds
• 1:20
  of kilometres just to hold their condition. For example, I've spoken with a cattle operation out
• 1:24
  of central New South Wales, facing dwindling pasture at home, and arranged to move a portion of
• 1:30
  the herd all the way into central Queensland. It's a big logistical headache, the added transport
• 1:36
  costs, but for them keeping their breeding herd healthy was worth it. And this quantum movement
• 1:42
  isn't uncommon right now. It's a real indicator of how desperate the situation has become when
• 1:47
  producers are willing to haul their stock that far just to find feed. And on the finance side,
• 1:52
  banks and lenders are watching this trend closely. They see the risks involved in buying properties
• 1:57
  purely for feed, especially when these properties are outside the borrower's core area. Loan
• 2:03
  assessors are increasingly cautious about approving finance for these purchases unless the
• 2:07
  borrower can demonstrate a clear exit strategy. It's not just about the property or the paddock
• 2:11
  anymore, it's about managing the risk in an unpredictable season and volatile market. The
• 2:16
  shift from dirt to grass is more than just a change in buying habits. It reflects the reality
• 2:21
  of Australian agriculture, where climate variability can turn a strategic expansion plan
• 2:26
  into survival decision overnight. And that's why understanding the real implications of buying for
• 2:32
  feed is critical before you make the move. Over the years, we've seen some producers do very well
• 2:37
  at purchasing properties for grass to get them through a dry spell, but it's not a guaranteed
• 2:42
  strategy, and the hidden costs can be brutal. Let's run a real scenario. You'd run out of feed, and you
• 2:48
  consider buying a $5 million block to hold, say, 450 breeders. On paper, it looks better than paying
• 2:53
  the exorbitant investment rates or selling the herd at a loss. But you have to factor the on
• 2:58
  costs. You're paying stamp duty and legal fees on a $5 million purchase. The stamp duty alone in
• 3:03
  many states can be a few hundred thousand dollars. We'd head straight to your cash flow, and then you
• 3:09
  have the legal fees, cost of going for inspections, time and travel costs involved in managing
• 3:14
  another property. And you have the operating costs of managing a second property potentially hours
• 3:18
  away from your home base. And who's going to manage it? Often gets asked who's going to check
• 3:23
  the water? And one of my clients recently bought a relief block 250km away from their core operation.
• 3:29
  They quickly learned that the water infrastructure hadn't been maintained, and this
• 3:33
  became a full time job for their manager. They'd install new pumps, upgrade the tanks, make sure the
• 3:38
  herd could get access to water reliably, and that meant additional capital expenditure on top of
• 3:43
  the purchase price and the on costs. Then you have to consider the exit strategy. You're purchasing
• 3:48
  this property outside of your normal area, and you are seeing it at its absolute best when it has
• 3:53
  feed and everywhere else is dry. So what happens in 1218 months. When it rains at home and you want
• 3:58
  to sell the block you've purchased for glass. Will that property be saleable when it doesn't have
• 4:02
  the premium feed standing on it? You know, I recently had a client who brought a relief block
• 4:06
  during a severe drive, and the property was in great condition when they bought it. But a year
• 4:10
  later, when the range returned to their home property, the property they purchased was dry
• 4:15
  again. And it didn't attract the buyers of the price they wanted, and they ended up holding it
• 4:19
  for longer than they planned and paying interest on it for years. This is a common scenario in this
• 4:24
  circumstance, so if the market turns, you could be holding a $5 million asset that you don't
• 4:30
  actually want while you're paying interest on it every single month. And remember, the banks expect
• 4:34
  their interest payments regardless of the season or your cash flow situation. And if you've maxed
• 4:39
  out your borrowing capacity and that debt becomes a heavy burden quickly. So understanding these
• 4:43
  numbers is crucial. It takes the emotion out of the purchase. You have to compare the true cost of
• 4:48
  acquisition against the cost of adjustment, or the cost of selling down and buying back in later. And
• 4:53
  before you sign a contract on a new property. You have to seriously evaluate the adjustment
• 4:58
  alternative. When the panic sets in and the grass disappears. Buying a property feels like taking
• 5:03
  control. It feels permanent. Adjustment, on the other hand, feels like you're throwing money into
• 5:08
  the wind and you're paying someone else for their grass. And at the end of it, you have no asset to
• 5:12
  show for it. But let's look at the actual cash flow. Yes, adjustment rates skyrocket during a dry
• 5:17
  spell, and you might be paying top dollar per head per week. I've seen adjustment rates climbed from
• 5:22
  $5 a week to over $12 in severe dry conditions. And that can be painful, especially when you're
• 5:28
  managing a large herd. But that cost is entirely variable. The moment it rains at home, you put the
• 5:33
  cattle on the truck and you bring them back, and the adjustment bill stops immediately. When you
• 5:37
  buy a property, the costs are fixed. The interest bill arrives every single month, regardless of
• 5:42
  whether it rains or not. The rates and taxes have to be paid, and if the dry spell breaks in three
• 5:47
  months, you now stuck servicing a massive debt on a property you no longer really need. Adjustment
• 5:52
  might feel expensive in the short term, but it preserves your capital and protects your balance
• 5:56
  sheet for long term structural damage. A broker can help you model both scenarios side by side,
• 6:01
  showing you exactly where the break even point sits between paying the adjustment or taking on
• 6:05
  additional debt. For example, one of my clients was facing a $3 million purchase for a relief block.
• 6:12
  We ran the numbers and compared it to adjustment over 12 months. The analysis showed that their
• 6:17
  break even point was about ten months at the current adjustment rates, since they expected rain
• 6:22
  sooner. Adjustment was actually a smarter play financially and gave them the flexibility. So
• 6:27
  knowing these figures ahead of time removes the emotion out of the decisions. It's not just about
• 6:32
  hoping the weather will turn or fearing the worst. It's about making a clear commercial call based
• 6:38
  on the facts. So if you're looking at your own paddocks right now and trying to weigh out
• 6:41
  whether to buy another block for grass or pay adjustment or sell down your herd, that's exactly
• 6:46
  what I can help with. Book a free call with me, and we'll run the numbers on your finance options so
• 6:52
  we can make a clear commercial decision. This is also where finance becomes a tool for flexibility,
• 6:57
  not just for growth. When the season drives the market, you need a broker who can help you weigh
• 7:02
  the short term pressure against your long term financial health. We help clients structure their
• 7:07
  finance so they're not forced into making desperate decisions. If the numbers do stack up
• 7:11
  and buying another block is the right move. You need a facility that allows you to move quickly
• 7:15
  when a block with good feed hits the market. You don't have six weeks to wait for a bank to
• 7:20
  process the paperwork. We ensure you have pre-approved facilities and your equity is ready
• 7:25
  to draw down so you can secure the grass before someone else does. I remember one client who was
• 7:30
  on the phone to me 8 a.m. in the morning. I'd spotted a block that had just come on the market,
• 7:34
  had a lot of feed, suited their operation because we had a pre-approved loan facility in place, they
• 7:39
  were able to make an offer that afternoon. They beat all the other interested parties who were
• 7:43
  still waiting on their bank approval. So my point is, timing is everything in these situations. But
• 7:47
  more importantly, we help you manage your cash flow under pressure if the right decision is to
• 7:52
  hold your breeders and feed them, we can structure working capital facility to cover the cost of
• 7:56
  fodder adjustment and keep your core herd stable. We put a risk length over the entire operation to
• 8:02
  ensure that a buying grass decision actually stacks up beyond the current season. We give you
• 8:07
  the breathing room to make sure the decision is based on a commercial reality, not just the
• 8:11
  weather forecast. There's one more hidden cost of buying grass that rarely gets talked about, and
• 8:16
  that's the opportunity cost of your capital. When you drop $5 million on another block, you're tying
• 8:21
  up a massive amount of equity in borrowing capacity. That capital is now locked into a
• 8:26
  defensive move. It's protecting what you already have rather than driving your business forward. So
• 8:30
  what happens if in six months time after buying that block, that the property next door comes up?
• 8:36
  That's perfect for your operation. The property you've been trying to buy for ten years has
• 8:39
  finally hit the market. But because you've maxed out of your facilities buying grass 300km away,
• 8:45
  the bank will say no. And you miss out on that strategic generational expansion opportunity
• 8:49
  because your capital was tied up in a short term weather play. It's just something that needs to be
• 8:54
  considered in this exact situation. Happened to a client of mine last year. They bought a block out
• 8:58
  of desperation for grass, only for the next property next door to their home block to come up
• 9:03
  six months later and the property would have doubled. Their herd size added significant value
• 9:08
  to their core operation. Economies of scale. With the property next door no more limited additional
• 9:13
  running costs. Unfortunately, their borrowing capacity was exhausted and they missed out and
• 9:16
  the opportunity cost. And this is real and it can have generational consequences. And this is why we
• 9:21
  always urge our clients to look at the big picture. A brokers to help you protect your
• 9:25
  borrowing capacity for the opportunities that actually matter. And sometimes the smartest
• 9:30
  financial decisions you can make during a dry spell is to sell down your stock, take the cash,
• 9:35
  and keep your powder dry. So when it finally rains, you have the capital ready to restock at the
• 9:40
  right time or to pounce on the strategic acquisitions when the neighbours are still
• 9:44
  recovering. It's about resilience, not just survival. Making your finance work for you means
• 9:50
  preparing for the ups and downs and not just reacting to tough times. Having flexible
• 9:54
  facilities. Knowing your limits and having a plan for every scenario puts you in that position of
• 9:59
  strength. That's the kind of strategic financial advice that can make a huge difference in the
• 10:04
  long run, because at the end of the day, agriculture is a long game. The last thing you
• 10:07
  want to be doing is locked in an inflexible debt on a property that was bought on panic in no
• 10:12
  purpose. So remember guys, buying a property is a 20 year decision. Don't make it based on a six
• 10:17
  month dry spell. Take the emotion out of it. Run the numbers and understand the true cost of
• 10:22
  acquisition. And if you need help structuring your finance to give you flexibility when the season
• 10:26
  turns. Reach out to seasoned finance as your broker. This is exactly what I do for my clients,
• 10:31
  and I'll see you in the next episode. Thanks for tuning in. Dolls in the dirt. If you've got value
• 10:36
  from today's episode, make sure to subscribe so you never miss the insights you need to grow your
• 10:40
  business. And if you're ready to stop being just another number to the banks. Visit Season Finance
• 10:45
  via the link in the show notes. Remember to follow us on socials and catch you next time.