Australia agribusiness lenders urged to rethink rural risk

DAS has published a report arguing that Australia's agribusiness lenders need to change how they assess rural credit risk as agribusiness lending grows to AUD $140.3 billion.

The report, titled The New Agri Lending Landscape, identifies five structural forces reshaping agricultural finance: insurability, climate risk, non-financial production signals, broker-led complexity and artificial intelligence. DAS argues these factors are changing how lenders assess collateral, repayment risk and asset quality in a market that has traditionally relied on methods closer to residential property assessment.

Outstanding credit to the agribusiness sector has risen 80 per cent since 2019, the report says. Agricultural production spans 55 per cent of Australia's land mass, while average farm capital values have increased almost six-fold over the past two decades.

Rapid lending growth has coincided with a broader rise in borrower complexity. The market now includes not only traditional farming families but also institutional investors, corporate agriculture groups, lifestyle buyers and other new entrants, each with different expectations and risk profiles.

Risk factors

A central theme of the report is that insurance is becoming both a credit issue and a protection issue. The ability to insure a rural asset is increasingly affecting its long-term financeability and value as collateral, bringing insurance considerations closer to the front of lending decisions.

Climate risk is also moving from disclosure into day-to-day credit assessment. Rather than focusing only on major events such as floods and bushfires, lenders are under pressure to examine changing rainfall patterns, drought frequency and production resilience at parcel level.

The backdrop is a financial system facing tighter scrutiny of physical climate risk across loan books. At the same time, average farm debt has nearly doubled over the past decade to about AUD $1.1 million to AUD $1.2 million, adding to pressure on lenders to refine how they assess serviceability and long-term resilience.

Sarah Gorman, Co-Founder and Head of Growth at DAS, said the changes are structural rather than cyclical.

"For a long time, agri lending has relied on many of the same principles. What's changed isn't agriculture itself, it's the amount of information now available about rural assets and how quickly the risks are evolving," Gorman said.

"Record lending, rising land values, climate variability, changing borrower profiles and better access to parcel-level intelligence are all converging at the same time. Collectively, they're changing what good lending looks like."

Beyond accounts

The report argues that conventional financial statements no longer give lenders a full picture of agricultural risk. Measures such as farm productivity, seasonal resilience, carrying capacity, land condition and climate exposure are becoming increasingly relevant to long-term repayment capacity.

Those indicators, which DAS describes as non-financial lending signals, are already measurable but often sit outside standard credit processes. Their absence can leave lenders with an incomplete view of how a farm business may perform over time, according to the report.

"Financial statements remain important, but they only tell part of the story," Gorman said.

"Farm productivity, resilience over multiple seasons, carrying capacity, land condition and climate exposure all influence long-term repayment capacity. We call them non-financial lending signals, and they're measurable today."

Another source of complexity is the growing role of brokers in agricultural lending. As more loans are originated through broker channels, lenders face added pressure to verify rural assets with information that goes beyond standard paperwork, the report says.

DAS also identifies artificial intelligence as an operational shift in the sector. It says AI is not a substitute for experienced agricultural bankers or valuers, but a tool that can put more relevant information in front of decision-makers during credit assessments.

"This isn't about replacing experience with technology, it's about giving experienced people access to better and more complete evidence. The lenders that combine human expertise with high-quality rural intelligence will make faster, more consistent and ultimately better lending decisions," Gorman said.

DAS argues the market is developing information gaps between borrowers and lenders, between land and finance, and between valuation and climate risk. As agricultural loan portfolios expand, it says rural intelligence is becoming a core part of financial services infrastructure rather than a specialist add-on.

More than 140 clients use the company's rural intelligence platform, including Rabobank, IAG, the Australian Bureau of Statistics, Nutrien, Cargill and Viterra. The report argues that agricultural lending now requires more detailed and standardised evidence on land condition, productivity and resilience than many lenders have traditionally used.

"Agri lending has always been about understanding the land and the people managing it. What's changing is our ability to see risk more clearly, more consistently and at a much finer level of detail. That's the shift we have identified, and we believe it's the next chapter of agricultural finance," Gorman said.