Farm debt 'a cancer', say graziers

29 Aug, 2014 04:00 AM
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Queensland graziers Barry Hughes and Rob Atkinson took their message to Canberra.
Everyone has got to stop walking around this issue of debt because it is a cancer
Queensland graziers Barry Hughes and Rob Atkinson took their message to Canberra.

INTENSIFYING drought conditions in Queensland and NSW have sparked a heated debate in Canberra about escalating rural debt and calls for a major overhaul of bank lending practices.

Queensland graziers Barry Hughes and Rob Atkinson took a no-nonsense message to Canberra politicians this week about the worsening social and economic conditions with 70 per cent of the State now drought declared.

That message was backed up the unambiguous results of a recent survey by the Gulf Cattlemen’s Association, which showed the dire circumstances equate to more than just casual rhetoric. The survey showed there’s been a 28pc decline in property values since the live export ban in June 2011, coupled with a 22pc increase in debt.

Mr Atkinson said with the average herd size of the survey respondents at 7700 head of cattle, “we’re talking about businesses with scale”.

“It’s not just little cattle producers - big producers are also in trouble and concerned about their future,” he said.

“This survey also shows there’s been a six-fold increase in the debt burden carried by businesses in these cattle districts and that’s having a major effect on our local towns and communities.

“These issues are real, current and hot off the press - and we want to bring it to the attention of anyone we can.”

Policy change the key, not handouts

Mr Hughes said the cattlemen weren’t asking for handouts from the federal government. Rather they wanted all politicians and government officials to understand the financial crisis in their home State is “spiralling out of control downwards” with the social impact intensifying. He wants to start a new discussion about the debt crisis issue that targets sustainable solutions to the declining terms of trade faced by producers.

Mr Hughes said banks need more compassion and understanding of how to manage adverse circumstances like drought at upper levels of management.

The graziers held several rounds of meeting this week and were encouraged by support from Deputy Prime Minister Warren Truss and Agriculture Minister Barnaby Joyce to hold a roundtable to address the debt issue.

Mr Joyce announced on Wednesday the debt roundtable will be held in Canberra on September 23.

Mr Hughes said top level executives from the big banks would be invited to the forum.

“We’re targeting the six major rural lenders at this point in time, but that number is still flexible as well,” he said.

“We want to see change coming from the top down for rural lending policies. The deputy prime minister was very supportive of making the debt issue a priority for government to consider right now,” he said.

Mr Hughes said the roundtable would likely involve relevant government agencies in agriculture, human services, small business and peak industry bodies.

“We want to steer it away from being too bureaucrat-heavy and make sure we achieve practical outcomes,” he said.

“We want a humanitarian aspect too, but we’re still in the process of pulling it together and at this stage nothing has been set in stone.”

New ideas needed

One of their key concerns was banks foreclosing on farmers and charging penalty rates for late interest payments when their income is strained due to compounding seasonal factors.

Mr Hughes said the latest forum would be different to a rural debt meeting held by former Treasurer Wayne Swan in Brisbane in late 2012, which formed the genesis of the former Labor government’s farm finance package the following April.

“We’ve got a different government in place now and we’ve moved on 18 months since that roundtable occurred,” Mr Hughes said.

“But the spiralling down of the debt pressure, the humanitarian side of this saga, has gained the realisation right now that government needs to step up to the plate.

“We got a lot of support from the MPs and Senators here in Canberra this week.

“In some cases it was an eye-opener for some of them, the scope and scale of the debt issue and the humanitarian issue that’s impacting our area.

“By the time Monday was done and dusted we could feel there was momentum on the issue.”

A 'perfect storm' of bad conditions

Mr Hughes said the situation had intensified over the past 18 months given there’d been another failed rainfall event and depressed cattle prices due to limitations with supplying meat works. He said land conditions had “certainly deteriorated as the drought has tightened its grip”.

“The psychological aspect of this issue has also ramped up considerably and the list goes on and on and on,” he said.

“One thing we’re well and truly aware of is the government’s tight financial position - but this is not about money. This is about commonsense, practical solutions being put in place to take our industry out of the debacle it’s in right now.”

Mr Atkinson said profitability issues existed before the live cattle suspension of 2011, but the month-long ban was a catalyst for the escalating debt issues now faced by industry.

“Now - with drought and depressed prices - it is the perfect storm,” he said. “But everyone has got to stop walking around this issue of debt because it is a cancer and we’ve got to find a way.

“Even those producers who had strong equity and balances sheets before this all started are now having problems. Surely everyone representing agriculture... their first mandate should be keeping farmers on the land and that’s what we’re about.

“Something has to be done now.”

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Colin Bettles

Colin Bettles

is the national political writer for Fairfax Agricultural Media
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READER COMMENTS

Wayne & Sandra
29/08/2014 9:17:55 AM

Congratulations to Rob & Barry on their efforts. They are doing more for our industry than all the agri organisations, which don't seem to understand the severity of the situation.
RDQ
29/08/2014 9:46:37 AM

We need policy changes yes . Everyone is entitled to make an income in Australia unless you are a primary producer. The day of "cheap food" will soon be over
Bushfire Blonde
29/08/2014 10:26:24 AM

3) have thumbed their noses at the RBA by not passing on its Interest Rates in full. 4) pay their CEOs extraordinary amounts of money. 5) repeatedly make record profits. 6) are expecting at least one rural client to commence making Capital repayments in the middle of the Drought. 7) are foreclosing on clients who are operating in Drought conditions, some of which have been operating for generations. Because they are charging the highest rates in the WW, the Au$ is artificially high and hence robbing exporters of the right price for their product. NO WONDER Nth Aussie Producers are struggling!
Bushfire Blonde
29/08/2014 11:23:45 AM

"Every picture tells a thousand words" The expression on Barry's face tells it all - he has had a gut full of the situation as have many many of his colleagues all over Northern Australia!
K Taylor
29/08/2014 11:51:11 AM

1. Producers need more debt like the proverbial. (Even at cheap rates unless it is to retire higher rate borrowings.) 2. Banks to assess lending on viability and not resort to asset lending. At least the borrower has some chance. 3. Successful producers borrow in the tough times when they know they are getting value for money. (The only event to follow good times are tough times and they are probably just around the corner. Conversely, the reward for expanding in the tough times are that the good times are just around that corner.)
angry australian
29/08/2014 1:04:44 PM

Rural debt can be cancerous, but if Barry and Rob are going to turn it into a bank bashing exercise they may as well not step on the plane. Some debt in some businesses is necessary , for example when you want to buy a new tractor or even the neighbour. Where debt has become a problem in rural Australia is because we now don't have the level of profitability to service this debt. Our government mandated costs have exploded exponentially over the last 20 years while the return for our product has struggled to keep pace with inflation.So when an event like drought hits we're battling to pay.
Jacky
29/08/2014 2:46:06 PM

How much debt is from expansion?
Bushfire Blonde
29/08/2014 3:17:49 PM

Well come on W & S, lets get behind Barry and his colleagues; Lets make the Gulf Cattleman's Assn big and strong just like the NT Cattleman's Assn has become. One of the main troubles with Agforce is that they are too close to the Qld Government and too reliant on funding from then. Lets build a strong grass-roots, web-based Organisation to tackle the various troubles that we have. And get in behind Bob Katter's idea of a Rural Reconstruction Board. We cannot rely on the Banks to give us a fair go - they are too interested in pandering to the moneyed men of the World.
Ted O'Brien.
29/08/2014 9:07:27 PM

I have said it many times, and I say it again. Unilateral Trade Reform is suicidal policy. Utter lunacy. Australian agriculture MUST have some government defence against corruption by foreign governments of world pricing for farm produce. When the NFF took us on a jaunt with this policy in the mid 1980s, we were promised that within a couple of years the rest of the world would stop subsidising and we would have the Utopian Level Playing Field. It didn't happen, but the NFF and all political parties have maintained that policy in the face of failure to the present day.
Bushie Bill
1/09/2014 12:24:25 PM

Ted, our current trade policy serves the Australian economy and the Australian people well. It is a policy designed to maximise consumer interests rather than producer interests; exactly as it should be.
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