Livestock finance: how farmers fund buying stock

The feed has come back, the agent has a pen of steers that suit your country, and the sale is Thursday. You know the cattle will grow. What you don't know is whether to put them on the overdraft, borrow against them, or wait. This guide covers the ways farmers fund buying stock, and the numbers to check first.

I started as a personal and business banker at Greater Bank, and I've worked in commercial and equipment finance since 2018. This is general information about how livestock finance usually works. It isn't advice on which lender or product suits you, so compare offers and read each lender's terms.

The ways farmers fund stock

There are five common ways. Many farms use more than one.

1. The overdraft or seasonal facility

The simplest way is to buy stock on the farm overdraft or seasonal facility, then pay it back when they sell. Westpac's business overdraft page, as one example, says interest is charged only on the amount you use.

The catch is that stock bought on the overdraft use up room you need for running costs. A 2018 Farming Ahead article said stock loans are a cost-effective way to free up overdraft room. See farm overdrafts and seasonal finance for how to size a limit.

2. A term loan

A term loan (a set amount borrowed for a set time) suits stock you plan to keep, such as a breeding herd. Cows bought to breed from earn money over many years, so a longer loan can match that. Trading stock you plan to sell within months usually suit short-term finance better.

3. Dedicated livestock finance

Some banks and stock agents offer finance just for buying livestock. The stock themselves are usually the security (what the lender can sell if the loan isn't repaid). The 2018 Farming Ahead article said stock loans are available from most agents. It said they use the value of the livestock as security, rather than tying up land.

Two stock agents publish livestock finance pages:

• Nutrien Ag Solutions describes a facility for buying livestock and animal health products. It has a minimum of $25,000 and can run for 12 months, renewed by agreement. It's secured by a registered livestock mortgage, and fees are available on application.
• Elders Finance lists commercial livestock funding for sheep or cattle, stud stock funding and finishing finance (working capital for the costs of finishing stock). It says these are offered with partners and are for commercial clients.

These are examples, not recommendations. Ask any provider about the term, fees, how the stock are valued and whether you must buy or sell through them.

4. The RIC Drought Loan, for restocking

The Regional Investment Corporation (RIC) is the Australian Government's farm lender. Its Drought Loan can be used to recover and rebuild, including restocking when seasonal conditions allow. It lends up to $2 million over 10 years. The first 5 years are interest only, then principal and interest.

From 1 August 2026, the variable rate on all RIC loans is 5.71%, up from 5.18%. RIC reviews the rate every six months.

The RIC Drought Loan page lists conditions as at October 2026. Among them:

• you contribute at least 75% of your labour to the farm and earn at least 50% of your income from it, under normal conditions
• the business is in financial need, can repay, is viable long term and has existing commercial debt
• at least 50% of your total debt stays with a commercial lender
• you provide security, have a drought management plan and have your commercial lender's support.

The page doesn't say whether the loan is open right now, so check with RIC. The AgriStarter Loan form also lists purchasing stock as an example use for first farmers and successors. See RIC loans explained and drought support for farmers.

5. Agistment or leasing instead of buying

You don't always need to own stock to use the feed. You can take in other people's stock on agistment (grazing their animals on your land for a fee). That earns cash from spare country without borrowing. Some farmers also run stock under a share or lease deal with the owner.

If you're short of country, the reverse works too. You can put your stock on someone else's land on agistment. Get any deal in writing. Restocking after a dry year compares buying in, breeding back and agistment.

How lenders look at livestock as security

The PPSR (Personal Property Securities Register) says crops and livestock are personal property and may be used as collateral (security for a loan). A lender that lends against stock will usually register its interest on the PPSR.

Stock are a different kind of security from land. They can die, get sick, be sold or lose value quickly when the market falls. Lenders know this. The RBA said in 2013 that lenders weigh how much farm income can swing.

So expect a livestock lender to ask:

• how many head you're buying, and what you're paying
• where they'll run and what feed you have
• when and how you plan to sell them
• what happens to the loan if you sell some early.

Check before you buy

If you buy stock privately, you can search the PPSR first. The PPSR's case study shows a buyer searching under the seller's company number. It says a registered security interest would have meant there was debt or another obligation owing against the stock.

The risk of a price fall

When you buy stock to trade, you're betting on two things. The stock must gain weight, and the price must hold. If prices fall while you hold them, the margin shrinks fast.

If the stock are also the security, a price fall hurts twice. Your profit falls, and the stock are worth less against the loan. A lender may then want the loan paid down when you sell, or more security. Read what your contract says about this.

A worked example: trading margin with interest

This is an invented steer trading operation near Wellington, and the figures are illustrative. Prices, costs and the 8% interest rate are made up for the example. They aren't market prices or a lender's quote.

The farm buys 100 steers at 300 kg for 400 c/kg. It runs them for six months to 450 kg, then sells them at 370 c/kg. One steer dies.

The interest is worked on the purchase price plus buying costs, which is $124,000. Half a year at 8% is $4,960. Without interest, the margin would have been $23,405. So interest takes about a fifth of the profit.

The margin is $18,445, or about $184 for each steer bought.

The same deal with a 15% price fall

Now say the market falls 15% while the steers are on feed. The sale price drops from 370 c/kg to about 314.5 c/kg.

The checks: $140,110 less $6,930 is $133,180. Take away $139,460 and the result is a loss of $6,280. The break-even sale price is about 329 c/kg. Below that, this deal loses money.

That's the number I'd want before the sale on Thursday. You can run your own with the cattle trading margin tool, then put it in the cashflow forecaster or season stress test.

Questions to ask before you borrow for stock

1. What's the margin with interest, and what's the break-even sale price?
2. When must the loan be repaid, and does that match when you plan to sell?
3. What happens if you sell later than planned?
4. How does the lender value the stock, and what if prices fall?
5. Do you have to buy or sell through a particular agent?
6. What are all the fees?

Who arranges livestock finance

Farm CFO by Clunes Rural doesn't arrange loans. For livestock finance, I refer people to stock agents and lenders that offer it, such as Elders and Nutrien Ag Solutions. Farm CFO receives no referral fee for these referrals. My job is the budget and the cashflow that show whether the purchase stacks up.

For all the types of farm finance in one place, see what loans are available to farmers.

Where to get help

• Regional Investment Corporation: Drought Loan and AgriStarter Loan, on 1800 875 675.
• Rural Financial Counselling Service: free, independent financial help for farmers, on 1300 771 741.
• State farm lenders: see state government farm loans.
• NSW DPIRD Farm Business Resilience Program: workshops and coaching on business planning. Check the NSW Government page for what's running.
• The ATO and your accountant: for how trading stock is treated for tax.
• A solicitor: for agistment, share or lease deals and any loan guarantee.

If you'd like the purchase built into a full budget and cashflow, the Bank Review Pack is $1,850 plus GST and includes a 15% price drop case. For a quicker look at where you stand, the Farm Health Check is $850 plus GST.