Live Export

NT producers outline picture of financial devastation

James Nason, 26/07/2011

The financial crisis engulfing northern cattle businesses following the closure of their major market seven weeks ago is deepening. No income since early June, a vanishing workforce that took years to build, mounting costs to keep businesses afloat, and little prospect of cash relief for weeks and months ahead.

This is the picture of financial devastation that is engulfing many northern cattle and hay producers seven weeks after the Federal Government closed their single major market in early June.

Northern Territory producers say many businesses are likely to go to the wall because the Government that stopped their industry in its tracks has not provided the financial assistance they need to survive until exports resume.

“In reality, they are going to pour a few hundred million dollars into a hole that is probably at least $200 million,” one NT producer, who declined to be named, told Beef Central yesterday.

When an industry worth $320m a year suddenly stops without warning, the financial blackhole created has to be paid for by someone. Increasingly that burden is falling on those least able to bear it in small family-owned and run businesses directly reliant on the northern cattle trade.

Under the Federal Government’s $30 million assistance package, businesses that rely primarily on cattle for their income can apply for $5000 in disaster relief and up to a maximum of $20,000 to assist with ongoing business expenses.

One cattle and hay producer told Beef Central yesterday his business will lose at least $500,000 as a direct result of the ban under “a best case scenario”, and potentially more depending on how long it takes for exports to return to normal volumes.

He said a lot of NT producers had been on the borderline of profitability before the ban occurred, due largely to plummeting land values caused by the collapse of MIS schemes two years ago.

“A lot of people with debt on over-inflated land values won’t survive this,” he predicted. “We had a big period of inflation due to the MIS schemes, land values went up ten-fold in some cases, banks lent money for people to buy their neighbours out, then you saw the backward slide when MIS schemes started to fail, and suddenly there was no bottom in the rural property market up here.

“Once that competition for land went out of the industry values plummeted and suddenly their balance sheets said they were insolvent.”

Producers are also lamenting the loss of hard-to-find workers as a result of this crisis. Attracting and retaining quality staff has always been a challenge in remote regions. Many NT property workers were lost to $100,000/year-plus mining jobs in in recent years. “The ones who stayed were the ones who were truly committed to the industry, now they have to go because they don’t have jobs.  It will be very hard to get good people like that back now.”

Mounting costs

Fergal O’Gara from the Northern Territory Agricultural Association said one large feedmill had been forced to put off its seven staff after the ban, including the owners’ own son.

Thousands of bales of hay that would normally have been sold to export yards and to feedmills for processing into pellets remain stacked in paddocks throughout the Katherine-Daly Basin.

Despite having no income, hay producers must now find the money to restack hay into larger stacks and buy in heavy-duty tarpaulins at $5000 apiece to protect and carry their hay through the four month monsoonal wet season.

Mr O’Gara said grass hay was fetching anywhere from $150-$180 a tonne prior to the ban, and legume hay was earning $180-$220/t. It was impossible to say what hay would be worth now due to the over-supply that now exists.

“I deal with a lot of the smaller pastoralists and family run operations and the feed producers, hay growers and feed mills, and they’re all doing it tough at the moment,” Mr O’Gara said.

“There is a lot of uncertainty about what is going to happen next year.

“They have spent the money on growing hay, now they have to spend money tarping it and protecting it. All the hay guys are tied intimately to the cattle industry, if that has a hiccup, they all suffer.”

Production costs are naturally high in the Top End given that 3000km worth of freight has to be added to the cost of most inputs. With no rural power, some producers spend at least $5000– the same amount the Federal Government is offering in cash relief for the impact of its ban – every week just on diesel to generate electricity.

Subsidy solution

The NT Agricultural Association presented agriculture minister Joe Ludwig during his visit to Darwin in late June with a list of the suggested measures to ease the burden on small rural businesses until they were able to trade again.

Their recommendations included making fodder and transport subsidies available to cattle producers to enable them to use some of the hay currently stacked in paddocks to feed their cattle. This in turn would help hay producers to generate the cash flow required to pay their contractors, who in turn could pay their bills for fertiliser and chemical and seed and fuel and keep much-needed income circulating throughout the rural economy.

The association also recommended tax-year deferrals to allow businesses that came out of the last financial year with a liability because of the ban to defer that liability to next year to remove the pressure of having to find cash to pay tax bills now.

The association has not had a response from Mr Ludwig.

Aged cattle cull

One producer told Beef Central that the realities of the crisis dictated that many producers would have to shoot aged cattle. The heaver-than-normal stocking densities now being carried on many properties meant they would not be able to bring aged cattle up to adequate condition for long-haul road journeys to eastern or southern markets. 

Normally producers would carry their aged cows through another wet season to gain the condition required for long-distance road transport.

“Cattle will have to be shot now because people have carried them too far beyond the 350kg. The better stock will be kept for sale into a slaughter market.

“The older cows don’t have the condition to travel the long distances at this point of the dry season. 

"They won’t be so strong now, especially if they have had a weaner taken off them early in the year. They're not going to pick up and they’re not going to be in good enough condition to travel, and they wouldn’t meet the specs – they only buy those fatter cattle."

An NT vet is understood to have warned Mr Ludwig on his NT visit in late June to expect that at least 20,000 aged cattle would have to be shot as a result of increased stocking pressures created by the ban. 


Your email address will not be published. Required fields are marked *

Your comment will not appear until it has been moderated.
Contributions that contravene our Comments Policy will not be published.


Get Beef Central's news headlines emailed to you -