I feel so badly for the Lemontree Feedlot family. This is nothing short of appalling. Imagine 120 people arriving on the doorstep of your business that you operate from your home where your family and employees families live, with the sole intent of defaming you and your business simply because they chose to lead a vegan lifestyle. (link below)
As it stands we can not prevent anyone from entering our farm and if they do, we can not prosecute them with any effective result. They are simply above the law as it currently stands. Farmers are being judged guilty by social media kangaroo courts while the real criminals are laughing at every form of law enforcement.
They are able to operate under the guise of Not For Profit organisations, with tax benefits that are effectively funding criminal activities.
So let’s look at a few basic truths about our Australian Feedlot Industry.....
1. Cattle spend an average of 95 days on feed in a feedlot
2. There are 400 accredited feedlots in Australia
3. The average feedlot capacity is 2,793 head.
4. 96% are Australian owned and over 95% are FAMILY owned.
5. The Australian feedlotters developed Australia’s first accreditation scheme for their members to adhere to in 1994.
Also remember as we in rural Australia struggle through a major drought, feedlots provide a drought mitigation strategy for beef producers.
They allow for cattle to be sold in a finished condition when there is no feed in the paddocks. They allow for stock numbers to be lightened off reducing impact on grazing land that is under pressure without rain. They allow for consumers to enjoy high quality beef year round despite the season. They give grain producers a market for grain that is not suitable for human consumption. They provide employment to rural communities and support local businesses.
While we personally have not yet been affected by activists, it is quite draining as you become suspicious of strange vehicles, dubious of people motives & questions, and simply must now investigate every unknown noise or light at night.
I am angry because we have always welcomed inquiries and visits but now we are far too distrustful of motives. I am angry that we need to explain to our young children that they need to tell us if they see strangers or drones around our family home. I am angry that social media is a platform for lies and fabrications about our farmers. I am angry that suspect footage and monetary motives can see our farming businesses defamed.
We aim to do everything we can for the cattle in our care. We pride ourselves on what we do and how well we do it.
Australian farmers need protection to be allowed to produce the best beef in the world. We need to be entrusted with the right to farm. We need your support, not in dollars but in voices to drown out the lunatic fringe who wish to impose their lifestyle choices on everyone.
If you ever have a question about food or fibre production please take the time to ask a farmer.
7 November 2015, Roma Explorer’s Inn
Function Centre
The Label Conversation Snapshot
By Sherrill Stivano
and Liz Todd
The opportunity to gather and talk about a single label for
Australian primary produce was a concept well supported with over 60 people
attending The Label Conversation in Roma on Saturday 7 November.
Sherrill Stivano is not just a farmer, wife and mum, but
someone with vision and foresight for Australian agriculture. The Label Conversation saw the culmination of
12 months of work for Sherrill and her project, for which she was awarded the
2015 RIRDC Rural Women’s Award for Queensland.
The event was made possible with support from Liz Todd, a dedicated
committee, the Maranoa-Balonne Catchment Management Association and sponsorship
from industry, government and businesses.
Sherrill opened the conversation by challenging forum
participants to think beyond Country of Origin Labelling and look to how
Australian agricultural producers can gain tangible benefits from effective
labelling of food and fibre produce. Domestic
and international consumers would ultimately benefit from a single label,
backed by credible standards, which could be a unifying step for Australian
agriculture. Sherrill stressed it must be a grass roots movement, with farmers
contributing to the foundation of the label.
Participants hailed from across the country, and globe, to
join in the conversation.
Representatives were present from industry bodies including Meat and Livestock
Australia, AgForce, Growcom, Australian Lot Feeders Association, and The
Council for Sustainable Egg Farming and pork industry; along with government
departments, researchers, community groups, businesses, farmers, consumers,
council and politicians.
Member for Warrego Ann Leahy congratulated Sherrill Stivano
for her initiative on an important issue.
Ann emphasised that if Australia doesn’t provide good practices, someone
else in the world will do it for us, taking away market access and farm gate
profitability. This initiative is an
opportunity for the region to set goals and direction, and for the rest of the
country to see the progress that would better define our food on a local,
regional and national level.
The RIRDC project funds supported the attendance of Andrew
Blenkiron who is Vice Chair of the Red Tractor Assured Food Standards in the
United Kingdom. Andrew is also a farmer,
responsible for Euston Estate that generates 60,000 tonne of produce on an
annual basis. It was clear from Andrew’s
first hand account that a single assurance and label system has delivered
direct benefits to farmers through streamlined assurance standards and
auditing, consumer confidence in products, marketing opportunities and a
positive image. This achievement has
been the result of 20 years of hard work across the whole supply chain to
restore the tarnished reputation of the industry stemmed from major health and
safety concerns in the 1990s.
Andrew’s advice to Australia if building a brand or label,
is to start at the beginning and demonstrate significant tangible benefits to
producers. The UK was forced to start
the other way by demonstrating producer standards to consumers. He advised using the label as a one stop
marketing tool, with the focus on one brand that is easily recognised on the supermarket
shelf, as multiple and even competing industry branding is confusing to
consumers.
Specialising in consumer perceptions of agriculture is researcher
Dr Heather Bray, from the University of Adelaide, who brought to the
conversation insight into the issues of ethics and price surrounding consumer
choices. Driving consumer’s choice is taste, price,
nutrition, freshness and safety. Heather
shared that beliefs don’t necessarily equal behaviour. There is lots of literature about our choices
for moral or “better” choices, which is competing with other messages producers
are getting about cheap and fast food.
Consumers are making moral choices quickly as the complexity of types of
information being asked to consider at time of purchase is too much. They need to think about what the cow was
eating, antibiotics, how the food was grown…; when they just want a steak. They go to the brands they trust because they
can’t process all of the information. A
new label won’t raise awareness of food production, but it can encourage purchase
of products with the label over others due to high levels of trust in
Australian farmers.
Greg Mills, Managing Director of Food Integrity Solutions
weighed in on the conversation about building trust in our modern food
systems. He explained that trust equates
to a social licence to operate or privilege of operating with minimal
formalised restrictions, such as legislation or market requirements. Losing a social licence means increased licensing,
penalties and regulation by governments and supermarkets, which costs money, as
demonstrated in the United Kingdom. Trust
in farmers is high, but agriculture’s response to values and ethical production
questions is based on science and economics.
Consumers are looking for producers that share their values and indicate
that trust, but are not necessarily finding it.
It is not about changing agriculture, but how we are talking about it.
Meat and Livestock Australia (MLA) shared their journey in the
red meat industry and development of the “True Aussie” brand. MLA is producer owned and a not-for-profit
organisation. They provide services to
the red meat industry by gaining market access, supporting trade and technical
access, and business development and brand building. Lisa Sharp, General Manager Central Marketing
Industry Insights, said consumers are asking for more as they become more
sophisticated and seeking food experiences.
Looking broadly at markets and consumers, there are megatrends around
sustainability and ethics as well as health and wellness. As a result, the True Aussie brand was
developed on sustainability, fearless food and feel good food. Understanding consumer attitudes and behaviour
i.e. ‘consumer insight’ informs all strategy development and marketing programs
at MLA with a “think global” approach, customised for local markets. Consumers do seek peace of mind, they want
confidence in the product they are buying, and are concerned about
sustainability and wellbeing.
Dr Ian Plowman facilitated several discussion questions with
panellists Dr Heather Bray (Adelaide University), Greg Mills (Food Integrity
Solutions), Richard Norton (Meat and Livestock Australia), Lisa Sharp (Meat and
Livestock Australia), Georgie Somerset (AgForce), Dougal Gordon (Australian Lot
Feeders Association), Rachel Mackenzie (Growcom), and Richard Routley (Southern
Region Department of Agriculture and Fisheries).
What are the labelling systems we currently have and what are
the strengths and weaknesses? Some key
points were that the horticulture industry is lacking in compliance and
consistent labelling that provides benefits to those producers doing the right
thing. There are currently areas of high
risk relating to food safety, however all farmers are enjoying the premise that
Australian grown means clean and green. The
meat industries are well regulated, with various brands and quality assurance
programs currently in place including Australian Pork Industry Quality
Assurance Program, Aus-Meat and National Feedlot Accreditation Scheme.
Consumers take three seconds to make a decision. They are confused with so many types of
labelling systems and are overwhelmed. They
are cautious about product statements and claims, and sceptical about
traceability through distribution facilities.
Consumers are let down, they want to make a choice about products they
buy. The systems are in place but
consumers are not provided with the information or a label that underpins the
understanding of the systems, so they go to farmers markets where there is no
accountability. Collectively the fresh
produce sector is letting agriculture down, but it is also not accessing
markets opportunities.
For some industries, “it is those not part of the brand that
is bringing the brand down”. Small
producers are difficult to engage, non-conformers are tarnishing reputations
and provoking activists, and each producer creating their own brand makes it
hard to have a collective industry identity to market internationally.
Gaining retailers support for consumer and producer benefits
needs to be win, win, win. Coles and
Woolworths each have their own systems in place with tight controls over food
safety and quality. They need a point of
difference and their branding is very valuable. There would be a better chance
of adoption of a national label by new entrants. With Costco and other global players coming
to Australia, it would be an ideal situation to provide them with an ultimate
peace of mind.
What is the ultimate benefit to the consumer? When Australians buy beef or lamb, we know
with certainty they are making decisions by 1. Price, 2. Nutrition, 3.
Versatility and 4. Taste. So if a label
is about the integrity of the product it will not fundamentally drive
demand. We can ensure we have consumer
and community support for agriculture, and a label might be one way to do that,
but domestically price is the major driving force. The same applies to eggs, for all of the
media hype around caged egg, sales have fallen by .5% and may be
increasing. There has been anti-marketing
regarding the product and branding, but consumers are still demanding caged
eggs. We often think what the market
wants is what the loudest consumer wants.
What are the benefits and opportunities a single Australian
agricultural products labelling system might offer?
A single system would underpin the standards and
traceability, enabling producers to get on with being the story tellers by
talking about their products and marketing the experience.
A single labelling system needs to offer increased
profitability. If a single brand/label
offers market advantage, market access, and increased demand it will give that
label a price advantage. Potentially if one system or label covered all of the
existing assurance systems, it would improve adoption of practices at the farm
level, it would reduce the cost of multiple audits and ensures compliance,
which should result in a profit for the producer.
Outside of agriculture, all consumers see you as
farmers. A single label will bring
agriculture together to present a single face.
Industries that don’t learn don’t last.
Industries are repeating the same research with the same people, which
is a waste of time and money. It might
be time for agriculture to have a conversation internally, then engage the broader
public. Agriculture needs to talk to each
other and be seen as a collective industry, not competing against each other.
What consumers say they want and what they put in their trolleys
are different. Having a social licence
in the United Kingdom is providing an £80 benefit per livestock, with the continuing
ability to farm under great pressure from the environmental sector. Farming in the United Kingdom is under
scrutiny, but the system has the capability to demonstrate confidence. Programs are not Best Management Practice unless
it delivers a bottom line to the farmer.
Agriculture has left it up to others to tell our story. Major brands have a whipping hand unless agriculture
develops its own standards. Australia
has great attributes, but we don’t do great job of selling it compared to New
Zealand who does a great job of selling itself and brand awareness.
A national brand offers the opportunity address the
standards and certifications so we get a chance to talk about the things we do,
what we do, about the values and to tell the stories.
How would this be driven forward by producers? Engage in a conversation not just about a
label, but where we want agriculture to be in 20 years’ time, if it leads to a
label that would be great. Producers
need to get involved in industry and organisations that have a voice at
national level and find a path that has national influence.
In the United Kingdom, with quality assurance systems in
place, moving forward is about the tangible benefits of being better together
as an industry. The industry is better
with all working together and not about one sector against another. The industry doesn’t do well if one part of the
industry isn’t performing. Experience
shows it is easier to get discounters such as Aldi on board, as they leave
quality assurance checks to contractors and don’t have their own systems. Engaging consumers is putting pressure on
retailers by demanding Red Tractor products.
Georgie Somerset offered closing comments to the
conversation started by Sherrill Stivano, that one should “never doubt that a
small group of citizens can change the world”.
Georgie challenged participants to make a commitment of time, treasure
or talent to continue the conversation and support those who are stepping up to
challenge the norms and changing the face of agriculture.
Video Links for the Forum:
Presentation by Andrew Blenkiron Vice Chair of Red Tractor Assurance UK
Presentation by Dr Heather Bray Senior Research Associate The University of Adelaide
Presentation by Greg Mills of Food Integrity Solutions
Question Time for Dr Heather Bray and Greg Mills
Presentation by Richard Norton, Managing Director of Meat & Livestock Australia and Lisa Sharp, General Manager of Central Marketing and Industry Insights
Panel 1 Addressing: What are the labelling systems we currently have and what are the strengths and weaknesses?
Panel 2 Addressing: What are the benefits and opportunities a single Australian agricultural products labelling system might offer?
Panel 3 Addressing: How Might this conversation be driven forward by producers?
The wrap up
The event was sponsored by:
Member for
Warrego Ann Leahy
Performance
Feeds
Landmark
Roma
QRAA and Tony
Koch
Business
Excellence Program
Roma Chamber
of Commerce
Roma
Explorers Inn
Greg Mills
of Food Integrity Solutions
Dr Ian
Plowman
Maranoa-Balonne
Catchment Management Association
Bellevue
Feedlot
Liz Todd Photos supplied by Georgie Somerset, Sherrill Stivano & Liz Todd Videography by Mick Russell of Linchpion Studios
Country of Origin Labeling (CoOL) in Australia is long overdue. The link below gives more insight into the Government's proposed new CoOL scheme: http://www.industry.gov.au/industry/IndustrySectors/FoodManufacturingIndustry/Pages/Country-of-Origin-Labelling.aspx As a consumer I am tired of combing the back of packets to determine where the food is made, if it is an Australian product and whether the company is Australian owned. I simply want to be able to make an informed decision at the grocery store as to what food I put on my family's table, and this I imagine applies to most Australian families from across all income ranges, no matter their budgetary restraints. The new CoOL scheme offers much more information at a glance than currently exists. There is still however, more room for improvement, especially to name the country from where the imported food has originated, every time, not just when companies might like to comply. It is pleasing that foreign owned companies like Simplot who invest greatly in Australian vegetable growers will eligible to show a 100% Australian grown label. BUT what is the tangible benefit that will flow back to our Australian farmer? As the proposed CoOL scheme stands there will be no benefit to our farmers. The consumer will benefit, but is demand really going to drive up an increase in seasonally produced foods? Will the Australian wheat grower experience a marked rise in price for their product or the Australian livestock farmer find an increase in farm gate prices? Will the Australian fruit grower experience increased demand for their fruit? No. There will be no significant change. With careful thought, industry consultation and proactive efforts, we can make a difference for our farmers. Effective and positive changes can be made in the following areas: 1. Tangible benefits for our Australian farmers through uniting under a single easily identifiable label. These benefits would entail less regulation and interference from government, activists and consumers, ultimately decreasing red and green tape costs. 2. Greater consumer awareness of the standards and assurance programs under which our Australian farmers operate to produce some of the healthiest food (and fibre) in the worlds. Our consumers trust Australian farmers, but need to grow a greater understanding of why. This should cross over from the domestic market place to our international consumers in export destinations. 3. Unifying Australian agriculture under a single label. Many agricultural industries have tried individually to make a difference in this space. As a unified industry, the strength of our position would be magnified greatly. These changes can occur without reinventing the wheel, without huge costs to implement and most importantly, with great costs or imposition to our farmers. Are you interested to find out more? November this year (2015) will see the Vice Chair (Andrew Blenkiron) of the Red Tractor Assured Food Scheme (UK) visit Australia. He will be key note speaker at a forum in Roma, Queensland, along with a tour of the Maranoa area and farms, before travelling to Canberra to attend additional engagements. The link below gives more information about the Red Tractor UK: http://www.redtractor.org.uk/ We can learn much from the Red Tractor experience. We can adapt and grow something that can operate in our Australian agricultural industries effectively. We can grow consumer awareness and understanding. If you are wanting to make a proactive change that will deliver tangible benefits please get in touch. This is our biggest opportunity to make an effective difference, but we need to get it right.
As I read through the Australian Government’s Agricultural
Competitiveness White Paper I am pleased to see Australian agriculture finally
receiving some long awaited attention. Having been relegated to the “too hard”
or “not vital” basket for some time it is heartening to see the Government attempt
to tackle the numerous problems unique to Australian Agriculture.
Do I believe this is the magic pill to address the great
variety of issues facing all of our Australian agricultural industries? No. But
it is a start and I hope it is a foundation on which we can build and improve
the outlook for Australian farmers and the industries that support and depend
on them.
Our politicians are trying to listen and while it is easy as
farmers to identify all the problems that we face on a day to day basis, it is
necessary to be able to provide thoughtful solutions. Think about one problem
you face in your agricultural business or local community and how that problem
could be alleviated or reduced given improved governance or policies. If we as
farmers cannot find solutions to our problems, how can we expect people with
little experience in agriculture and even less at operating a farming business,
to come up with workable, effective and practical solutions?
We have the solutions within our agricultural ranks. We can
make a difference. Stand up and be counted and make a difference. Inaction will
see nothing change and the struggle to improve profitability at the farm gate
will become increasing hard.
Do you have a solution to a problem (big or small)? Choose a
champion for your solution, be it a State Farming Organisation, Industry Body,
political party or local politician. Start conversations within your industry
to see if the solution can be refined or improved. There will always be critics
and those with a negative response, but study them further and ask what
produced that response. They may simply be the wrong vehicle to carry your
solution forward.
Ultimately any effective changes to agricultural policies
must happen in a bipartisan manner and be implemented for the long term.
Investment in agriculture is long term and it needs long term, consistent policies
that reach across the political divide and changing governments. Healthy and robust debate across the political
spectrum can be (and should be) constructive and result in improved solutions,
especially when combined with industry consultation and farm gate conversations.
Australian agriculture has many eyes focused on it and ears
listening right now…….possibly more than ever before. Let’s get this right.
And remember if the vehicle you chose is not responding, it
may be time to trade it in and try a different track. The key though is to firstly give the chosen vehicle
a chance.
Australian
farmers should be driving the country of origin labelling discussion for
consumers, to ensure full household confidence in our food, according to
Queensland’s 2015 Rural Women’s Award recipient, Sherrill Stivano.
Mrs
Stivano, a feedlot owner from Roma, received this award this week for her project
proposal to address food labelling based on her research of the Red Tractor
model created in the United Kingdom – long before the recent Hep-A
contamination in frozen imported berries.
“If we are investing our time and skills
to identify our Australian food, we need to highlight the excellent production methods
underpinning our agricultural industries,” she said.
“We must ensure consumers can easily identify
Australian products, knowing they are produced with environmental stewardship
and sustainability, excellent animal welfare practices and food safety through
traceability and regulation as a daily priority undertaken by Australian
farmers.”
Mrs Stivano said acknowledgement of production
and quality accountability must return to the farmer, not the supermarkets or
processors or RSPCA.
“These organisations have assurance
programs which the farmer must seek accreditation through at a cost to enter
the supply chain,” Mrs Stivano said.
“If we show our consumers why our food
standards are so high through a specific label instead at production level,
then this will drive the demand at the supermarket shelves.”
Mrs Stivano said while Australia’s
agricultural industries have excellent assurance programs in place, some could
be enhanced to include more specific concerns.
“This specific label must also
complement those farmers who have taken the time to develop their own brands,”
she said.
“The new label should be the first thing
the consumer looks for, followed by the preferred individual brand.
“This is an opportunity to make a
positive and proactive change, firstly for the farmer and then for the
consumer, at both domestic and international levels.
“This should not be rushed through to be
a vote winner or election catch cry. It must be a carefully considered and
consultative approach with industry bodies, farmers and consumer groups,” Mrs
Stivano said.
Proposed
Country of Origin Labels – how it could work
Any Country of Origin Label must have
these three key components at its core:
- Environment
- Animal
welfare
- Food
safety
The CoOL must showcase the excellent
environmental care and sustainability; animal welfare practices and food safety
standards and regulations that already exist in our food production chain, more
particularly on the farm before the commodities even leave the farm gate.
Costs and impositions must not be heavy.
Use existing framework already in place
from industry assurance programs through to levies and Australian Made.
Mrs Stivano said this proposed labelling
should be seen as an opportunity for farmers to showcase their existing
production methods under one banner that the Australian consumer can easily
identify
“It is imperative that under any country
of origin labelling discussions, the focus must not solely be on the consumer
at the end of the food chain, but at the start of the food chain, with our
farmers,” she said.
On winning this year’s RIRDC Rural Women’s Award for
Queensland…..
I have to admit I was completely caught by surprise when I
was announced the winner of this year’s Queensland award.
I cannot describe how very honoured I am to have been
selected as the 2015 Rural Industries Research and Development Corporation
(RIRDC ) Rural Women’s Award, Queensland winner.
I would like to thank you all for your congratulatory messages.
They are hugely appreciated.
I would also like to extend my best wishes and support to
the three inspiring finalists Kylie Stretton, Emily Rigby and Elaine Bradley. I
look forward to seeing great things from you all.
I would also like to thank the RIRDC judging panel of Agforce
Qld State Vice President Georgie Somerset, Westpac Regional General Manager Queensland
Agribusiness Peta Ward, RIRDC Chair Professor Daniela Stehlik and 2014 National
RIRDC Rural Women’s Award winner Lauren Hewitt for their confidence in my
project.
I would also like to thank Karyn Manktelow, Senior Project
Officer, Plant Industries and Food, Department of Agriculture, Fisheries and
Forestry for the support she gave all the finalists.
Thank you also to the sponsors Westpac, ABC Radio, Fairfax
Agricultural Media, RM Williams Outback and Agforce Qld.
Finally a huge thank you to RIRDC for not only helping to
provide rural women with the networks, support and confidence to achieve their
goals for agriculture and their rural communities via this award process, but
also for all the work RIRDC is undertaking to help improve outcomes for our agricultural
industries.
I am looking forward to my journey which involves exploring
the single labelling of our environmentally responsible, welfare based,
sustainable and safe Australian food. Single labelling will give recognition to
our farmers for their existing high standards of food production. It will also
give consumers an easily identifiable logo in which they can place their trust
when buying food.
#singlelabelling #rirdc #rwa2015 #farmersfirst
With Minister for Communities, Women and Youth Monoster for Multicultural Affairs Shannon Fentiman
With Finalists Kylie Stretton, Emily Rigby and Elaine Bradley, RIRDC Chair Professor Daniela Stehlik, RIRDC Director Keith Steele and ABC Landline Presenter Pip Courtney
There has been so much commentary from many different people and
angles on the current “rural debt crisis” and voices are growing louder
and louder……..but are they the right voices or do they deliver the right
messages? And where are the solutions?
Rural debt is a
complicated animal. To plan for the coming twelve months we have
completed as many as 4 cash flow budgets, all based upon weather
assumptions (wide spread rain, no rain, successful crop, no crop) as all
these factors affect our business and all in varying degrees (and no I
have not doubled up, each has a separate impact on our business).
By this example I am trying to show that every rural debt owed by a
farmer is an individual one, as different as the farming operations
responsible for service the debts. Many factors will affect different
farm businesses, like the following examples: 1. The Interest Only
demon – when people speak of servicing a rural debt, they could be
speaking of meeting their interest repayments rather than actually
repaying principle on the debt (remember this is not in all cases
though). As overdraft limits are exceeded through servicing the interest
on the interest only debts (generally Commercial Bill Facilities or
Fixed Rate Interest Only or Term Loans), a new higher limit is put in
place, using up equity in the mortgaged assets. There is a very high
portion of rural debt which would be of the interest only persuasion,
and this has not accumulated in the last two years, but over many years
and can present a huge problem when it comes to succession planning.
2. Loss of equity – The market value for rural properties over the past
decade had been steadily increasing in most areas, yet absurdly the
earning ability of the rural properties in most case was not rising at
all. So for little or no output farmers were handed an equity windfall
that some chose to borrow against. In recent times much of the value of
these rises has been trimmed off the value of rural properties leaving
debts that exceed the bank value of the property, effectively reducing
the security categorisation to partially secured and some institutions
have seen the need to call in the loans. 3. Lack of understanding
of terms of the lending documents – While we all understand that if we
borrow money, we must repay the money plus interest, the conditions
attached to mortgage documents, loan contracts and the like are
extensive and difficult to understand. Legal protection is offered for
those acting as Guarantors as they must seek independent legal advice
with most lenders to have the documents fully explained. Perhaps seeking
independent legal advice (despite the additional cost) is something
more people should do, especially when you consider the amount of money involved with many rural debts. 4. Not enough equity to begin with – Entry
into a rural industry is very hard, and can mostly be attributed to the
high cost of land. Rural land prices have presented a huge barrier to
new entrants to the industry, especially because the value of the land
is often not reflected in the earning capacity of the land or the return
on Investment. As a result some are highly geared to begin with,
allowing little margin for a downturn in their income stream when
confronted by poor seasons, a raging drought and/or falling commodity
prices. This can also apply to those children of retiring farmers who
inherit a large debt along with a farm. 5. A Bad Bank Manager –
perhaps he (or she) is the manager who strives to achieve their end of
year bonus through growing their lending portfolio and as a result does
not investigate the repayment or serviceability capacity of the farm
business properly while encouraging the uptake of loans. Perhaps they
are simply not skilled enough in being able to manage clients and
understand the individual needs or business capabilities. Either way a
bad bank manager can be the ruin of any business (not just rural ones),
and they can also have long term effects as a farm tries to trade its
way out of a poor position (before you add in a drought or poor seasons
and commodity prices), even if the next bank manager is one of the best.
6. The personality of the borrower – We of course have our risk takers
and our ultra conservative farmers, some who take a gamble on a business
decision for their farm which may not pay off. Surprisingly enough
though the ultra conservative farmer can also find himself in difficulty
when tough times strike, as he did not undertake something he considered
too risky but which could have put him in a better position. 7. Previous Banking Practices – during the 80’s and
into the 90’s banking practices were very different to what we have
today, but for many of our aging farmers that is when the debts were
originally taken out and they are still service a debt that would not
have been encouraged in today’s financial industry, and which has
resulted in making the tough times tougher. 8. Taxation – now this
is a contentious issue……..tax breaks for farmers. So I do hope I do a
little justice to my explanation as I see it. During the good seasons
and when commodity prices are strong, may a farmer has been encouraged
to invest in unscheduled repairs and maintenance, purchase new machinery
and other various methods to reduce the amount of tax they pay (which
can be a lot). There is also a Farm Management Deposit Scheme which
allows some money to be locked away in a fixed deposit for a minimum of
12 months and a maximum of 5 years (also the total amount is capped),
effectively moving that amount of income out of the taxable year and
allowing the farmer to draw on the funds in a time when income will be
reduced (usually due to poor seasons). Rarely are farmers encouraged to
repay debt as it is not a “tax effective” strategy. There are few other
industries that have set historical costs like farming with a volatile
income stream that depends on so many factors outside of the farmers
control like the weather (drought, flood, no rain when needed for crops
or rain when trying to harvest), commodity prices, the value of the
Australian dollar, and government policy. A crystal ball can only see so
far and the Live Export Ban was an example of a totally unforseen event
that is still having ramifications for some. The worst outcome is that
all the outside factors present at the one time. If we wan our farmers to fund themselves during extended droughts we need to provide the incentive through tax breaks in good times. If they are encouraged to pay down their debts in good times they will support themselves during the bad. These are just a few examples of issues that can determine in part the fortunes of rural borrowers.
I do believe there are some serious issues raising their heads now that
can be addressed to make small improvements for struggling farmers,
especially those facing the prospect of foreclosure. I wish I had
solutions to the larger issues for the here and now, but I can only
offer some small suggestions that would be of assistance in the future. Changes to the FMD (Farm Management Deposit) scheme
When funds are placed into an FMD, they attract a reasonable deposit
interest rate, but difference between the interest being accrued on
lending facilities and that earnt on an FMD is much greater, easily up
to 5% or more. I suggest that the FMD scheme be expanded to include an
offset arrangement against a nominated lending facility. And no this
does not already exist as suggested to me in the past by a politician.
There are no offset arrangements that can be utilised as a taxation
minimisation strategy during good times to allow for the retention of
funds for the tough times. Review of rural lending practices of the Banks
Once when I worked in a bank as an Agribusiness Analyst and there was a tough drought underway,
that bank quietly decreed that there were to be no foreclosures and that
managers were to do their best to facilitate the refinance of clients
and to help others weather the drought providing ongoing support in the
increase of overdraft limits (to avoid default interest rates). It was a
win for both the bank and the borrower as there were no foreclosures
and no farms being sold bereft of grass and water, for below market
value. I am glad to hear that this policy still remains in place today.
This is where I do struggle to understand the current round of
foreclosures. Surely the properties are being sold during this
widespread drought for below market value and therefore is there not a
good chance that the debts owed would not be covered by the sale
proceeds? I cannot understand how it could be considered good lending
practice and I suggest that the government does need to create a policy
for the banks around Natural Disasters (both drought, floods and
cyclones) whereby there are no foreclosures unless they had already been
underway. I would also suggest that the banks undertake to
employ a specialist team of managers who can take over and manage the
whole default process in a way which allows the farmer to process the
series of emotions, the first of which is denial, usually followed
swiftly by anger and this is generally when communications between the
bank and the customer break down. In fact I suggest that one of the team
be a counsellor who will be able to understand the farmer’s emotional
needs and ensure that any transition to a foreclosure is managed in a
way that leaves the farmer’s integrity and dignity intact and also
allows them to deal with the grief associated with the loss of their
home. Remember that your average bank manager lives amongst the
community, has friends in that community and is a part of the community.
They are not are not specifically trained to handle the emotional
impact of foreclosure. They may only ever experience one or two first
hand in their career. The simpler option for many managers is to cease verbal
communications or hand them over to another department (a very
impersonal one who has no job but to see to the removal of the
mortgagee). The communication channel then becomes a series of default
and legal notices. There is a more effective way to handle such a
sensitive issue than with a police escort and bullish tactics through
ensuring bank staff are sufficiently skilled or supported to manage the
difficult situation. Any review should also touch on the
disparity in interest rates between farms and businesses and the
standard home owner. While the financial market place responds quickly
to interest rate falls for personal borrowings, the response is much
slower to business lending generally. However should the rates rise, the
increase is generally passed on almost immediately to the farms and
businesses. There are more risks associated with business lending,
although I would love to see a study completed to prove this claim.
Additionally there are numerous unnecessary fees that once never existed
(I joined the bank a year before account fees were introduced, the
following year was hell). As our banks are not struggling I would love
to see them offer some waivers in certain fees to any businesses
impacted heavily by Natural Disasters, not only farmers during times of
drought. Education I saw today a comment which was so very true and correct, and I will now paraphrase it:
Farmers have invested heavily in educating themselves about farming
practices and how to do things better and more efficiently, grow better
livestock, etc. but their financial education has not seen the same
investment. I do think this is a vital and neglected area that
could be easily addressed perhaps in conjunction with the Rural
Financial Counselling Services but in a proactive manner rather than a reactive manner. Remember…………… It is
important for us to remember that our banking system and our major banks
are very sound having survived the Global Financial Crisis reasonably
unscathed. Any steps taken cannot undermine the strength of our
financial institutions, or foreclosure will become the norm (like parts
of the US) rather than occurring occasionally. A farm is a
business and there are many other non-farming businesses out there who
struggle through the down turn in an economy, seasonal impacts and other
effects, however a farm can experience so many outside forces at once,
for such extended periods, leaving little to no income. There are few
businesses that can compare in this respect, let alone continue to
operate as many farms do. Diversification is a wonderful idea and practical in some areas, but for many other areas it is simply not a solution. A farm is a business and must be treated as one financially, otherwise sustainability and longevity is simply not achievable.
The best thing about the current debates, articles and coverage
relating to rural debt are the conversations that are occurring. Let’s
make sure they are constructive and lead to the development of workable
solutions at all levels. We may not be able to make a difference for
many currently affected, but let’s make sure that there is not a repeat
in the future and let's do this through mature debate and discussion. We don't have to like each other to develop solutions and ideas together.
At the end of the day it is there is a much more
insidious problem facing our farmers than the “rural debt
crisis”………….declining profits and erosion of farm gate profits. The
decline in profits for many has lead to a decline in their debt
servicing capability. Without correctly addressing this issue we cannot
address our rural debt and that is a whole other story.
