Latest / Dollars In The Dirt / #026 - The $1.48 Trillion Farmland Valuation

Transcript

#026 - The $1.48 Trillion Farmland Valuation · Dollars In The Dirt

• 0:00
  Australian farmland is now valued at a staggering $1.48 trillion.
• 0:05
  Most producers think that because their property is worth more on paper,
• 0:09
  they are automatically wealthier. And the truth is,
• 0:13
  until you deploy that equity, it is just lazy capital sitting
• 0:16
  in the dirt. After helping hundreds of farmers secure over a
• 0:19
  billion dollars in finance, I can tell you that the best
• 0:23
  operators don't just sit on the record valuations. They
• 0:26
  strategically release that capital to build bulletproof businesses.
• 0:30
  So in this video, I'm gonna show you exactly how the top tier operators
• 0:34
  are using the $1.48 trillion boom to
• 0:37
  diversify off-farm, acquire strategic assets, and
• 0:41
  protect their legacy before the market cools. Welcome to
• 0:44
  Dollars in the Dirt. I'm Brecon Curtis and this is where we break down
• 0:47
  the finance side of farming so you can grow your operation, buy
• 0:51
  that next property and build real wealth. Let's get into
• 0:54
  it. If you've owned your property for more than five years, you're
• 0:57
  likely sitting on a massive amount of unrealised equity. But
• 1:01
  here's the brutal truth. That equity doesn't pay the
• 1:05
  bills, it doesn't buy groceries and it doesn't protect
• 1:09
  you from a drought. If you leave it locked up in the land, you're
• 1:12
  entirely exposed to the seasonal and commodity risks of
• 1:15
  your rural business. I see farmers all the time who are asset
• 1:19
  rich but cash poor. And they've got a property worth $15 million,
• 1:23
  but they're stressing about paying for a $50,000 tractor repair because
• 1:27
  their cash flow is tight. The smartest operators look at that $15 million
• 1:31
  valuation and ask, how can I use this equity to generate
• 1:34
  consistent, reliable cash flow that has nothing to do
• 1:37
  with the weather? They treat their farm not just as a place to run cattle,
• 1:41
  but as a balance sheet to be leveraged. When you
• 1:44
  leave equity sitting in idle, you're also missing out on
• 1:48
  the compounding effect of capital. Inflation is eating
• 1:51
  away at the purchasing power of your cash, where your equity
• 1:54
  just sits there doing nothing. The banks love it when you have a
• 1:58
  low debt and high equity, because it makes their loan book look incredibly
• 2:01
  safe. But what's safe for a bank isn't always what's optimal for
• 2:05
  your business growth. you need to shift your mindset from being
• 2:08
  a landholder to being a capital allocator. Once
• 2:11
  you realise your equity needs to work, the next step
• 2:15
  is diversifying off-farm. Progressive operators are
• 2:18
  utilising the equity in their rural properties to invest in assets
• 2:22
  that generate consistent cash flow. We're talking about commercial
• 2:26
  real estate, residential portfolios, or
• 2:29
  even equities. And why, you ask? Because rural enterprises
• 2:33
  have a seasonal cash flow. You might get paid twice a year when
• 2:36
  you sell your stock, but your expenses, your fuel, your wages,
• 2:40
  your interest, are often monthly expenses. And
• 2:43
  by purchasing an off-farm asset that generates steady monthly income,
• 2:47
  you're instantly de-risking your rural business. I
• 2:50
  recently worked with a client who had $8 million in equity in their cattle station.
• 2:54
  Instead of buying the block next door and doubling down on their exposure to
• 2:57
  the beef market, we restructured the finance to pull
• 3:01
  out $2 million and they used that capital to buy a commercial industrial
• 3:05
  shed in a regional hub. That shed now generates
• 3:09
  $150,000 in passive income from the rent. When
• 3:13
  the cattle market dips, They don't panic, because
• 3:16
  the rent over the shed covers their core operating costs. And
• 3:20
  that's what true financial resilience looks like. This
• 3:23
  strategy also provides a buffer against the inevitable cyclical
• 3:27
  downturn in agriculture. When the drought hits, or
• 3:30
  commodity prices crash, having an independent income stream
• 3:35
  that you're not focused to sell your core breeding herd just to keep the lights
• 3:38
  on. It gives you the holding power, which is the ultimate advantage in
• 3:42
  farming. Before we get into the next section, if you've got equity in
• 3:45
  your property and you're thinking about using it to buy additional land or
• 3:48
  fund a major expansion, That's exactly what we do to help
• 3:51
  farmers. Book a free call with me and we'll talk through what's possible
• 3:55
  from a finance perspective. There's no obligation, takes 20 minutes
• 3:59
  and the link's in the description. If you don't want to invest in off-farm, you
• 4:03
  need to deploy that equity in a strategic infrastructure that
• 4:07
  fundamentally changes your cost of production. I'm
• 4:10
  not talking about buying a new land cruiser. I'm talking about acquiring strategic
• 4:14
  water assets, building an exclusion fence or
• 4:17
  investing in heavy duty feedlot infrastructure. You want to use your
• 4:21
  current high valuations to fund massive upgrades before any
• 4:24
  potential market cooling. If land values drop, the bank's appetite
• 4:28
  to lend will drop also. You've got a window right now to secure the
• 4:31
  capital you need to drought-proof your operation. Think
• 4:35
  about water. If you can use your equity to secure a
• 4:38
  reliable water allocation or build significant on-farm storage,
• 4:43
  you change the entire risk profile of your business. You move from
• 4:46
  being a price taker at the mercy of the rainfall to a price maker
• 4:50
  who can hold stock and sell when the market's high. The cost of
• 4:53
  finance to build that infrastructure is almost always lower than
• 4:57
  the cost of being forced to sell your herd in a dry season. Exclusion fencing
• 5:00
  is another prime example. By leveraging your equity, To
• 5:04
  force out wild dogs and kangaroos, producers are seeing a massive
• 5:08
  increase in lambing and calving percentages. The return
• 5:11
  on investment from the increased production easily covers the interest cost
• 5:15
  of the loan, while permanently increasing the carrying capacity and
• 5:18
  value of their property. Finally, purchasing off-farm assets
• 5:22
  is one of the cleanest ways to handle your long-term succession plan. The
• 5:26
  hardest conversation in any family farm is how to pass the
• 5:29
  farm. to the child who stayed, without
• 5:33
  completely counting out the children who left. If all your wealth is
• 5:36
  tied up in dirt, your options are terrible. You either saddle
• 5:39
  on farm child with a massive debt to pay out their siblings, or
• 5:42
  you're forced to sell the property and split the cash. Both
• 5:46
  options usually destroy the farming legacy. But
• 5:50
  if you've spent the last 10 years using your farm equity to build a
• 5:53
  portfolio of commercial and residential real estate, the
• 5:56
  conversation changes completely. The child who wants the farm gets
• 6:00
  the property and the operating business, and the child who's moved to
• 6:03
  the city gets the commercial real estate and passive income. Everyone
• 6:07
  gets their fair share, the farm stays intact and the business isn't
• 6:11
  crippled by succession debt. It requires planning and
• 6:14
  it requires action now while valuations are high. This approach
• 6:17
  removes the emotional friction from succession planning. It
• 6:21
  turns a zero-sum game where siblings are fighting over a single asset
• 6:24
  into a structured wealth transfer. But it
• 6:28
  only works if you start early and you use your equity strategically
• 6:32
  while the market's strong. Remember guys, a high valuation on
• 6:36
  paper means nothing if you don't use it to build a stronger business.
• 6:40
  Stop letting your equity be lazy, diversify your income,
• 6:44
  upgrade your infrastructure and plan for the future. If you need
• 6:48
  help reviewing your current valuations and structuring a
• 6:51
  loan to safely release that equity, reach out to Season Finance.
• 6:55
  As a broker, this is exactly what I do for my clients. Thanks
• 6:59
  guys and we'll see you in the next episode. Thanks for tuning in to Dollars in
• 7:03
  the Dirt. If you've got value from today's episode, make sure to
• 7:06
  subscribe so you never miss the insights you need to grow your business. And
• 7:09
  if you're ready to stop being just another number to the banks, visit Season
• 7:13
  Finance via the link in the show notes. Remember to follow us on