Can livestock be used as security for a loan?

Yes. In New Zealand and Australia, animals are goods under the personal property securities laws, so the lender's interest sits in a general or specific security agreement and is perfected on the PPSR. In England and Wales, a farming company charges its stock in a debenture, and an unincorporated farmer can grant a bank an agricultural charge registered with HM Land Registry. Lenders often treat livestock as part of a wider security package rather than lending against it alone, because its value and numbers move.

Does the bank's security cover calves born after the loan?

Usually, if the security agreement covers after-acquired property, as a general security agreement does: each calf becomes collateral as the farmer acquires rights in it. A specific security agreement over a described mob may not reach new stock unless its description does. Under an English agricultural charge, the Act's definition of farming stock includes the progeny of livestock. The farmer's lawyer and the lender both read the collateral description.

Can a farmer sell stock that is subject to the bank's security?

Generally yes, in the ordinary course of farming. The personal property securities laws in New Zealand and Australia generally let a buyer in the ordinary course of the seller's business take the animals free of the lender's security, so the lender's protection moves to the proceeds. That is why security agreements commonly require sale money to be paid into the account the bank sees, and why a lender reads proceeds against head sold.

How do banks value livestock?

By class and number: cows, heifers, steers, ewes, lambs and so on, each at a price per head drawn from recent saleyard or schedule prices, or from a stock agent's or valuer's assessment. The count comes from the farmer's reconciliation, checked where the lender wants against tracing records or a physical count. Because prices swing with the season and the market, a lender may value the herd more often than the land and lend a smaller share against it.

// WORKED EXAMPLEWHERE THE RISK SITS

Livestock as Security: a Worked Example

Count the cattle, then count the money they turned into.

BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED 2026-11-07

// THE SHORT ANSWER

Livestock as security is a lender's claim over a farm's animals, the one form of collateral that breeds, dies, eats and walks to the saleyard on its own. The legal step is ordinary: a security agreement and a registration. The work is in following it. A lender that holds security over a herd holds a moving number, so it reads stock reconciliations, checks the national animal-tracing records and watches where the sale money goes. The question it is really asking is not how many animals there were at balance date but whether the ones that left turned into cash it can see.

BASIS Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.

// MAKE THE CALL

Issue 03 — Kauri Dairy Holdings. The patriarch is retiring. The bank hears about the succession plan from the accountant first. Your call first, then the senior banker's.

Read the file →

// 01 — WHY A HERD IS HARD COLLATERAL

Most security sits still. A building stays where it was valued and a machine keeps its serial number. A herd changes every week: calves are born, cull cows go to the works, store cattle are bought and sold, animals die. Its value moves with schedule and saleyard prices and with the season, because a dry autumn can force a farmer to sell when every neighbour is selling too.

Livestock is also the most liquid asset on most farms. That cuts both ways. It gives the lender a source of repayment that can be realised in weeks, and it gives a farmer under pressure a source of cash that can be realised before the lender knows. The security is only as good as the lender's view of the stock between counts.

// 02 — HOW THE SECURITY IS TAKEN

The personal property securities laws of New Zealand and Australia treat animals as goods like any others. A lender takes security under a general security agreement over all the farming business's assets, or a specific security agreement over described stock, and registers a financing statement on the PPSR. An all-assets security catches calves born and stock bought after the agreement is signed, because it covers after-acquired property. Some interests can still rank ahead of it. A financier that funds the purchase of particular stock can take a purchase-money interest that, registered in time, has priority over the bank in those animals. And in Australia, the PPSA gives a perfected interest granted to enable the stock to be fed or developed, such as a feed supplier's, priority over other security in that stock except a purchase-money interest.

In England and Wales, a farming company gives security in its debenture. A farmer who is not incorporated can grant a bank an agricultural charge under the Agricultural Credits Act 1928, fixed, floating or both, over farming stock that the Act defines to include livestock and its progeny. The charge is registered with HM Land Registry, and a farmer who sells stock under a fixed charge must pay the proceeds to the bank unless the charge or the bank allows otherwise.

Registration gives the legal claim. The tracking comes from elsewhere: New Zealand's NAIT scheme for cattle and deer and Australia's NLIS for cattle, sheep and goats record animals and their movements between properties, and give a lender a record to set against the farmer's own.

// 03 — THE EXAMPLE

A cattle breeding and finishing business, constructed for this page like every figure in it, gives its bank a general security agreement. The bank values the herd at an average US$950 a head and asks for the year's stock reconciliation with the accounts. The prices are the example's, not market data.

Opening herd 1,200 head

Calves marked + 420

Bought in + 150

Died − 30

Sold − 560

Expected closing herd 1,180

Counted at balance date 1,130

Unexplained − 50 × US$950 = US$47,500

Fifty head is not proof of anything. Deaths go unrecorded, a mob is away on grazing, a count is out. The second test matters more:

Head sold, per the reconciliation 560

At an average US$1,000 a head US$560,000

Sale proceeds through the farm account US$410,000

Proceeds not seen US$150,000

Herd value, counted: 1,130 × 950 = US$1,073,500

After a 20% price fall: 1,130 × 760 = US$858,800

The bank now has three questions, and only the farmer can answer them: where the fifty head are, where US$150,000 of sale money went, and whether the herd that remains still covers what the bank has lent against it at a lower price. The movement records will show whether the animals left the property and where to. The bank statement will show whether the money arrived somewhere else.

// 04 — WHAT A LENDER READS BESIDE THE HEAD COUNT

Machinery security is the nearest comparison, and the difference is the point. A tractor financed under a specific agreement is one asset with a serial number; if it is sold, it is gone and the register shows what was secured. A herd is an inventory that turns over, more like stock in a shop than plant in a factory. So the lender reads the flow as well as the balance: sale proceeds against head sold, purchases against new borrowing, and stock numbers against what the farm can carry through a dry season.

It also reads the farm's other security together with the herd. On a farm with a land mortgage, livestock is usually a smaller part of the security but the part that can move fastest, and a fall in stock numbers can be the first sign that a farm is funding its losses by selling capital.

DEFINED IN ONE PARAGRAPH → · AGRICULTURAL LENDING → · PURCHASE MONEY SECURITY INTEREST →

// 05 — WHERE IT DECIDES A FILE

At approval, it decides what is lent against the stock at all, and on what basis it will be valued and how often. At review, the reconciliation and the proceeds test decide whether the security is what the paper says. In a drought or a price fall, it decides whether destocking is a sensible response or a sale of the bank's security to cover a cash shortfall. And at enforcement, a herd needs feeding and care from the first day, which makes it costly to hold and quick to sell, and may make a lender's first step a conversation rather than an appointment. In New Zealand and most Australian states, a lender must also offer farm debt mediation before enforcing a farm debt secured over farm property.

WHAT YOUR BANK HOLDS AS SECURITY → · WHEN THE MILK PRICE FALLS →

// SOURCES

The documents the statements on this page rest on. Each was opened and checked when cited.

Agricultural Credits Act 1928 (England and Wales), section 5 — agricultural charges on farming stock and assets — Allows a farmer, defined to exclude incorporated companies, to create a fixed or floating agricultural charge in favour of a bank over farming stock, defined to include livestock and its progeny — sections 02 and the FAQ.
Agricultural Credits Act 1928 (England and Wales), section 6 — effect of fixed charge — Obliges a farmer who sells charged property to pay the proceeds to the bank forthwith, except as the charge provides or the bank allows — section 02.

// QUESTIONS PEOPLE ASK

Can livestock be used as security for a loan?: Yes. In New Zealand and Australia, animals are goods under the personal property securities laws, so the lender's interest sits in a general or specific security agreement and is perfected on the PPSR. In England and Wales, a farming company charges its stock in a debenture, and an unincorporated farmer can grant a bank an agricultural charge registered with HM Land Registry. Lenders often treat livestock as part of a wider security package rather than lending against it alone, because its value and numbers move.
Does the bank's security cover calves born after the loan?: Usually, if the security agreement covers after-acquired property, as a general security agreement does: each calf becomes collateral as the farmer acquires rights in it. A specific security agreement over a described mob may not reach new stock unless its description does. Under an English agricultural charge, the Act's definition of farming stock includes the progeny of livestock. The farmer's lawyer and the lender both read the collateral description.
Can a farmer sell stock that is subject to the bank's security?: Generally yes, in the ordinary course of farming. The personal property securities laws in New Zealand and Australia generally let a buyer in the ordinary course of the seller's business take the animals free of the lender's security, so the lender's protection moves to the proceeds. That is why security agreements commonly require sale money to be paid into the account the bank sees, and why a lender reads proceeds against head sold.
How do banks value livestock?: By class and number: cows, heifers, steers, ewes, lambs and so on, each at a price per head drawn from recent saleyard or schedule prices, or from a stock agent's or valuer's assessment. The count comes from the farmer's reconciliation, checked where the lender wants against tracing records or a physical count. Because prices swing with the season and the market, a lender may value the herd more often than the land and lend a smaller share against it.

THE IN-TRAY · ONE MINUTE

Make the call on one file.

A short file on the ground this page covers. Every option opens with how far it sits from a senior banker’s read.

THE FIRST QUESTION · THE LOAN · PROTECTION

A bank lends to a holding company whose only assets are shares in three operating subsidiaries. The subsidiaries have their own bank debt and trade creditors.

Where does the bank stand if a subsidiary fails?

7 MORE ON THE LOAN · PROTECTION →WHERE DO YOU READ FROM? THE PLACEMENT →

THE GLOSSARYIN ONE PARAGRAPHLivestock as security How does a bank take livestock as security, and why does the number keep changing?