Government policy failing farmers

19 Apr, 2013 02:00 AM

THERE has been a national failure in farm policy, with the net value of farm income flatlining and debt wound off the clock.

That was the key message from economist Ben Rees at the Agriculture in Crisis meeting in Merredin on Monday.

According to Mr Rees, major monetary and deregulatory policy formulated by all major political parties over decades had significantly disadvantaged the farming sector.

And while the WA broadacre grains industry was experiencing hardship, it was not confined to one State or commodity - it applied to the national agricultural sector as a whole.

Mr Rees said government policy had not adjusted to the changing structures of farm productivity, with free trade and deregulation holding the key to change.

A fundamental reason for the failure of national farm policy was monetary policy which had emerged from a conflict in fundamental economic knowledge.

"It has been evident since the introduction of supply-side economics introduced by retrospective prime ministers (Bob) Hawke and (Paul) Keating in the 1980s," he said.

"When we formed the Cairns group in 1986 you got this hairy-chested notion that we were going to show the world how to farm, we were going to put them out of business on efficiency and productivity."

According to Mr Rees, supply and demand models had shaped farm policy and meant failure, which he attributed to the Engel's law, the notion that a rise in income means a decline in demand for food in the budget.

He cited this as a feature of a modern expanding economy and said as the economy had grown, living standards had risen which had occurred at the expense of the farm sector.

This meant the farming sector had lost out as the demand for food diminished.

Mr Rees said rural debt began to cross over with gross farm production in 2003-2004 which was a stark contrast to the position in the 1980s where rural adjustment had been implemented.

He said the growth value and the net value of farm production illustrated how an increasing volume of farm production had been distributed away from the farm sector which he believed needed to be addressed.

He said deregulatory policy was also a prominent reason for farm policy failure in Australia.

He said governments had had encouraged monopoly power domestically while asking farmers to sell into a deregulated market.

"If anyone thinks they can solve the problems of rural debt in rural Australia with the rural reconstruction model of the 1970s and 1980s they're in Disneyland," he said.

"You have a very different banking system in operation now."

Mr Rees said debt had risen and a fundamental failure to address the problem reflected badly on all major political parties.

"Agriculture has been left with a result by governments of incompetence at worst and negligence at best," he said.

"A rural reconstruction model won't work, we need to address debt with a new model.

"So if you expect to solve this fundamental problem at the farmgate level you'll fail, because you will have to do something about the financial sector first."

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19/04/2013 7:38:56 AM, on Farm Weekly

The next phase of this story is not very pleasant. We have to de-lever all the bad debt in the face of buyers for that backlog of farmland drying up. The second hand machinery market is already flooded with gear. That's an ominous sign we have a detb storm to get through which you may find you will need to go back to the depression years to appreciate how serious this all is.
19/04/2013 8:25:29 AM, on Farm Weekly

Getting a significant amount of capital on each farming business balance sheet would be the answer. Oh! Demutualise CBH ownership and put that capital back where it belongs. On each member of the system's capital balance. We are not selling off the co-op we are just rightfully putting the owernership vehicle in it rightful place. Those who want to remain in co-op can and those who want to retire can exit with capital.
R. Ambrose Raven
19/04/2013 11:26:24 AM, on Farm Weekly

Wifey has at least provided a perfect example of farmers’ bankrupt thinking. Flogging-off the silver will only delay ruin. Destroying CBH simply offloads even more debt, cost, and risk onto farmers. A commercial replacement wouldn't, for instance, set up receival points where the farmers are; you go to it! Farmers and farming need direct government support for production cooperatives, regions and agriculture generally. Farmer ideologues – especially the PGA -are themselves are a real obstacle to any such renovation.
19/04/2013 11:38:06 AM, on Farm Weekly

Might be worth reading the article again, Wifey. Selling CBH isn't going to solve our problems, its a high $A, deregulation, powerful buying groups, an expectation of cheap food, and lack of rain that have got us to where we are. The Gvmnt could try and change a few of these things, but maybe theres not enough votes in it for them to bother.
19/04/2013 12:34:08 PM, on Farm Weekly

All the current problems can be assisted by a helpful injection of capital. Nobody can make it rain or change the $A but having a decent balance sheet will improve land values and give the banks confidence to loan carry on finance. I want a vote to demutualise CBH now so I can carry on with our family farming tradition. How unfair is it to walk out of farming with just $2.
19/04/2013 6:12:05 PM, on The Land

Switzerland controlled its currency as it gained value against the Euro. The government can control the currency, they just don't have the balls to do it and save Australia!!
19/04/2013 6:39:53 PM, on Farm Weekly

Sinkorswim, Their have been more farmers walk away with just $2 than there are grower members at the present time. It cost you virtually nothing to become a member of the co-operative, so what gives you the right to grab a heap of capital in the form of shares and walk away. Those shares would eventually fall into the hands of someone with no interest in the company but to milk it for what it's worth.
Have a think
19/04/2013 7:52:13 PM, on Farm Weekly

Wifey is spot on, and others are missing the point. If you own SHARES in CBH you can keep them as an asset on your A&L, and your equity is immediately better. It's your choice to sell the asset, but with demutualisation the asset sits on YOUR balance sheet.
20/04/2013 6:46:42 AM, on Farm Weekly

Ambrose said "Flogging-off the silver will only delay ruin". Trouble is if farmers don't 'flog the silver' they will have to 'flog the farm' and they will no longer be farmers. They will be unemployed and possibly unemployable. The logic of some farmers is extremely confusing to say the least. Corporatising CBH is a good solid first step to putting WA farmers in a better position equity wise. Then some tought decisions can be made.
rationalise the rationalists
24/04/2013 5:31:34 AM, on Farm Weekly

If you sell CBH you will blow the money and the company then will lift its charges to just under the costs for a effective competitor, guess who will pay? What is needed is simply a rescue package so people can plant a crop. Time is of the essence.
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