We need better security: grower

26 May, 2004 10:00 PM

A MANJIMUP potato farmer wants laws to be changed after one of the South West's largest horticultural exporters, Old Valley, went into liquidation and left growers out of pocket this month.

Bob Pessotto, who was owed money by Old Valley, said it was wrong that the cash flow of a company should go to secured creditors when a company went into liquidation.

He said banks secured big assets such as buildings - which might later be sold for much less than they were bought for ­ and also got a bite of the cash flow.

"In my opinion that is wrong," he said.

"The cash flow, which pays people¹s wages should be secured above everything else."

Mr Pessotto said he had been selling seed potatoes to Perth potato growers through Old Valley and though growers at the other end got their potatoes he was still owed $14,000.

He lost $8000 when another company folded two or three years ago.

"The law needs to be changed. This is the second time I have been caught," he said.

He said the money owed to him was minuscule compared to other producers, some who had lost hundreds of thousands of dollars.

"This is a serious issue as far as farmers are concerned because how do we know how that in any one day the real financial situation of companies we deal with," he said.

"I am not lending money but companies are, and I am not in business to take risks but the shareholders are," he said.

Mr Pessotto suggested a weekly rating on all companies be available so farmers could avoid dealing with a company about to go into liquidation.

Reports say Old Valley, which operated at Manjimup, Donnybrook and Canning Vale, owed producers approximately $3 million and that the sale of the $25m company was a possibility.

WAFarmers president Trevor De Landgrafft said the issue of producers being caught when a company went into liquidation was an age-old problem.

He said attempts to solve similar problems in the wool industry had failed.

He said the problem was exacerbated in WA¹s horticultural industry because it was segmented and competitive and did not have the security of an industry cooperative such as the grain industry¹s single desks.

He said farmers should try, where possible, not to sell the second load of produce before they get paid for the first one.

³You can insure against the problem but it is too expensive,² he said.

Mr De Landgrafft said he didn¹t advocate changing the system but he though some kind of register might be useful for producers to know where the companies were at, although privacy issues might prevent that.

WA Senator Ross Lightfoot urged producers affected by the collapse of Old Valley to make sure they attended the examination of the company¹s top management to ensure they got satisfactory answers.

³They need to pursue it to the very end,² he said.

Mr Lightfoot said the Federal Government had legislation on the table which would allow administrators of failed companies to look at transactions going back 10 years instead of the existing three years.

He said producers should consider contacting Slater and Gordon to act on their behalf to recover lost money.

Mr Lightfoot said that while he was not seen as a regulator he believed farmers in the horticultural industry should consider a co-operative.

³There needs to be some amount of control of their produce until it gets past the wholesale level,² he said.

He said that if there were between 50-100 people affected by Old Valley¹s problems Federal Government might be able to provide some form of assistance, due to impacts on small communities. Inquiries should be directed to him.



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