Restructure inevitable: banks

25 Apr, 2013 02:00 AM
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Westpac head of grain WA Chris Moore.
Westpac head of grain WA Chris Moore.

AGRIBUSINESS representatives have stood by the Premier after his controversial comments last week saying some farmers may need to leave the land.

Premier Colin Barnett received a major backlash from farmers after he ruled that the government would not be taking on farm debts.

"We will do all we can to see that farmers can place a crop in but it's got to be farmers who are viable," Mr Barnett said on ABC radio last week.

"It sounds a cruel and hard thing to say but some farmers probably do need to leave.

"I think most farmers realistically know that the State is not going to start interest rate subsidies across the board or it's not going to start taking over the risks or debts of farmers; that's not going to happen."

Those comments sparked major criticism from Merredin Agriculture in Crisis organiser and Muntadgin Farming Alliance co-spokesperson Scott Stirrat who wanted to know what farmers were supposed to do.

"We are not just dealing with a few badly managed businesses here," Mr Stirrat said.

"If growers cannot obtain carry-on finance this season they will not be considered viable businesses and according to the Premier they too should 'walk away'.

"If that's the case we will be looking at a mass exit from the industry very soon."

The group was also angered by a letter sent by Pastoralists and Graziers Association (PGA) president Rob Gillam expressing the lobby groups objection to the introduction of interest rate transaction subsidies as a measure to assist growers in marginal areas affected by adverse climactic conditions.

"They will be left living in communities half the size which can no longer sustain businesses, sporting groups and social organisations, all of which play a huge part in ensuring quality of life in rural WA," Mr Stirrat said.

But a number of agribusiness sources Farm Weekly spoke to backed the Premier's comments.

Many said that industry was going through a restructuring process which would mean some farmers would have to leave the land.

Those comments from industry also supported the controversial comments from Department of Agriculture and Food WA (DAFWA) grain industry director Peter Metcalfe earlier this year who said there needed to be a rationalisation of the agriculture industry.

One industry source told Farm Weekly it was a harsh reality for many farmers as they learned to accept that some of them would not put a crop in this year, while another agreed there were some tough times ahead.

"The problem is that the last 10 years are a lot different to the previous 10 years," the source said.

"In the last 10 years, farmers are producing about 70 per cent of what they were producing in the 1990s.

"Everybody is playing the blame game.

"One of the things that happen when people get close to a cliff is that they start pushing people off, and that is exactly what is happening now.

"But it is more out of the frustration of not knowing the answer than anything."

Last week the Premier met with representatives from the National Australia Bank, Rabobank, Commonwealth Bank, Bankwest, Elders and Westpac to discuss possible solutions.

NAB agribusiness State manager Andrew Clark said the meeting went well and the Premier pointed out the emotional attachment to the issues.

Mr Clark said there would no doubt be a restructure of the agriculture industry.

"One of the issues which gets raised and continues to be raised is that there are viable farming operations out in the Wheatbelt which simply can't get finance for this year," Mr Clark said.

"But we don't believe there are viable farming operations that aren't gaining access to finance.

"Those businesses which aren't getting finance are simply not being seen as being viable."

The banks also agreed in not supporting handing out money to farmers.

"We don't think it would change things and what most people seem to forget is that we are actually in partnership with these farming operations," Mr Clark said.

"We made sure the Premier understood that we are trying to achieve a protection of the customers' wealth as well.

"We are trying to make the right decisions for the right reasons.

"Just giving them more money for the sake of giving them more money is not the right decision."

Mr Clark said a number of ideas were canvassed for the State Government to think about, but would not reveal the details.

"It would be lovely if one good season solved all the problems," Mr Clark said.

"But in reality, if we were all honest, it will help but it is not going to solve all the problems, we actually need some stability back in the industry to rebuild that confidence."

He said the issue of equality in terms of handing out of money was also discussed and Mr Clark said it was important to remember there were still plenty of profitable farmers out there.

"These farmers have made the different management and financial decisions and, even though it does seem harsh at times, they are probably the future of the industry," he said.

"We would all love to be a magic bullet for those guys who are really struggling to get them back on level terms with everybody else.

"But we have to work on being realistic and professional and therefore have to look at what are the most likely outcomes of their businesses."

Westpac's head of grains WA Chris Moore said it was a productive meeting.

"There was a clear willingness from government to do something but what is going to be the most effective thing is what we are working through and they were seeking banks' input on that," Mr Moore said.

"So they (State Government) are going away to do some more work.

"They had a few ideas and we are not objecting to them but we were not sure whether that would necessarily have the best uplift."

Agriculture and Food Minister Ken Baston said the meeting with the banks was useful in getting a greater understanding of how widespread the financial problems were in the Wheatbelt and where the banks are at in terms of carry forward finance.

"Since then the government has been working on a package of measures, soon to be released, that will provide limited relief to those farming families that have to leave the industry because of high debt levels," Mr Baston said.

"The package will also provide some help to those who are operating on the margins and who will need an above average year to continue.

"As the Premier has indicated, it is not the government's role to become the lender of last resort for farm businesses.

"However, we will be working to provide social and community support along with some very targeted and limited financial help to a farming sector that has suffered an unprecedented series of frost and drought events over the past decade."

Mr Baston also said he would be meeting with Swiss Re Corporate Solutions' global head Bernard Belk next week about a Crop Mitigation Insurance (CMI) plan.

"The State Government supports the concept of Crop Mitigation Insurance as another management tool for farmers," he said.

"I plan to meet with Swiss Re in the near future and will be ensuring the Department provides them with as much data as possible so they can build a cost-effective product for WA farmers."

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READER COMMENTS

drowning in debt
25/04/2013 6:37:44 AM, on Farm Weekly

all the wheatbelt debt meetings did was give people false hope and devalue land in those areas cos buyers know where all the debt is concentrated! fact! nothing has been solved, the crisis WILL deepen. time to float CBH and give cockies an equity injection
beacon boy
25/04/2013 7:02:48 AM, on Farm Weekly

over to you cbh! the cbh board is the only bunch that can help this situation out. without our equity this debt mess is going worsen. a lot of families and towns are on the line here
Ryan Cowley
25/04/2013 7:05:06 AM, on Farm Weekly

Bank restucture is inevitable. Don't think farmers undertsand how many of them will be denied finance in coming years as this overburden of debt is delevered. Only the strong will survive unfortunately
Bosco
25/04/2013 8:22:17 AM, on Farm Weekly

Unfortunately, a legacy of deregulating the structure of an industry that only has a few customers, is that you end up with too many of the same businesses, all trying to produce and sell the same thing, to the same small number of buyers. The sharp way of putting that is there are too many farmers. Individual farms scramble to re-finance in order to survive, not realising that the fight for survival is now against their neighbours. This can't be sustained. It is normal that after a certain period post-deregulation, a free-market industry will go through a process of natural attrition.
goatybull
26/04/2013 8:58:38 AM, on Farm Weekly

What sneeded is a new type of finance market. Not banks, but rather a Mortgaged Backed Securities market where farmers can obtain finance direct from investors via a MBSF system. This way the banks would be cut out and private investors would be dealing direct with a MBS trader. Problem is, this type of system will never be able to be set up in the current environment with fallingland prices and the current state of things. Maybe in ten years time?
dont borrow to much
26/04/2013 8:56:59 PM, on Farm Weekly

Get big or get out was the talk in the wheat belt ten years ago I watched them buy the neighbours and get bigger and bigger machinery. I wonderd where it would all when end.
fred
26/04/2013 9:01:22 PM, on Farm Weekly

My grandfather told me when I was small don't bite off more than you can chew and if you can't pay for it, don't buy it. Maybe some of these producers would have been wise to follow these rules, they have worked for me.
Mark
3/05/2013 10:25:54 AM, on Farm Weekly

The only thing wrong with lending money is eventually they want it back. Just as I want my Term Deposits back when I lend to a bank.

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