Letters to the Editor

Letter – Rowell Walton: the canary in the coal mine?

Charles Nason, April 14, 2014

Traditionally coal miners took a caged canary down the coal mine with them. Canaries were very sensitive to methane and carbon monoxide and when the canary expired this was a warning of impending danger.

The Australian on Monday  14-4-14  informed us that the Walton Farming  Family at Condamine was in receivership.

This should be a warning to  farmers and   the country in general that the agricultural industry is not very healthy.

This is not  just another  farmer going bust as there are rumours of many others in the same predicament, and rumours  of tightening credit suggest that the flow on effects are already being felt  by rural suppliers.

A dead beast in the paddock is generally attributed to snake bite or lightening strike, but continuing stock losses ring  alarm bells  and a cause is looked for. Experts, advisors, friends and neighbours are consulted for the reason why.

Banks have been reluctant to provide QRAA with data to complete the 2013 Qld rural debt survey which suggests that there are quite a few unhealthy loans. Accountants say they do not see too many healthy farm balance sheets.

The margins in agriculture are too slim to build up sufficient financial reserves to weather the climatic ups and downs. Banks are being increasingly relied on  to fund on going farming operations.

Rowell Walton’s business like many others would have been under financial stress  from recent droughts and floods. But he was considered  viable  and an on going concern as the bank continued to fund his operation. What went wrong?

Droughts and floods have  taken their toll and left many farm operations in a very weak financial position. Traditionally the breaking of the drought refilled the coffers. However for our area the floods caused as much financial distress as the drought , so we entered the next drought in a further much weakened state.

It is suggested  that farmers are not very business savvy and need more business and management expertise . The Senate inquiry into rural debt in 1994 suggested this was a issue and Farmbiz was set up to improve management skills. 20 years of Farmbiz should have improved this. So maybe inadequate financial acumen is not the cause.

Australian agriculture has achieved outstanding productivity increases, superior to any other industry sector . Our agricultural scientists should be congratulated and thanked profusely as this has allowed farmers to survive the cost price squeeze  but as public funding for agricultural RD&E has been reduced, productivity growth has stalled.

Governments have invested heavily in “climate change” (and mostly on mitigation not adaption ) but have neglected the time proven problem of climate variability (droughts and floods). Farmers deal with climate risk all the time. These recent experiences suggest climate variability needs much more attention.

You can cull the supposedly inefficient or poorer doers out of your cattle herd but if you end up with too few left , you need to realise your selection criteria have been too harsh and you need to re-evaluate these criteria.

BOM  gave a very optimistic rainfall forecast for last winter resulting in  many farmers planting on suboptimal moisture and many cattle producers also held onto stock. Unfortunately this forecast was way out, which impacted heavily on farm incomes.These issues highlight  the need for measures such as the ARDB and a multi peril crop insurance scheme if Australia wants a viable industry.

Rowell Walton  followed the unchallenged conventional wisdom of  getting bigger to become more efficient and productive.

However the recent MLA northern beef situation report questions these so called economies of scale. It suggests a “sweet spot “ of about 3000 head. The general poor performance of the bigger agricultural  corporates suggests there are significant diseconomies of scale. This report suggests that most northern beef producers  are  economically unsustainable  – in an industry supposably doing well at the moment?

Maybe the traditional family farm unit may prove again to be the optimum farm production unit!

The economically unsustainable  issue is not confined to any one agricultural sector such as the northern beef industry this time  but seems to be common across  all agricultural industries

Australian farmers are regarded as the most efficient in the world. This may be for production but definitely not for profitability. We should look to what other countries do. However most other countries have not followed the freer trade route but “cheat“ and “protect” their farmers with much maligned subsidies. Why?  Maybe they have realised that supply and demand do not deliver the true costs of food production and if they wish to provide safe affordable food for their citizens, farmers need to be reimbursed adequately as investment will only occur if these is a profit somewhere.

You can cull the supposedly inefficient or poorer doers out of your cattle herd but if you end up with too few left , you need to realise your selection criteria have been too harsh and you need to re-evaluate these criteria.

The LNP seem to believe that free trade agreements will solve the problem. But based on recent FTA’s agriculture can not wait for 20-30 years for reduced tariffs , support is needed now!

How many more farmers are going to be sacrificed at the altar of economic rationalism before is is realised this is a false god ?

And are we prepared for the coming tsunami of farm foreclosures?

Charles Nason
Banoona
Roma Qld

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