The Scales of Justice are Broken in Rural Australia.

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The reason there has not been an issue of the Global Farmer for a while is because I have been investigating the circumstances which led to a major Australian bank, quite unnecessarily, foreclosing on a large family farming business in the south of Western Australia. Conspiracy is always hard to prove, so all I can do is tell the story and let you make up your mind.

There can be few among us who have not witnessed the distress and trauma in the eyes, demeanour and behaviour of relations, friends and associates when they are confronted with the awful news that their creditors have appointed receiver managers.

They stumble and fall as they search for a quiet place to go through all the emotions that well up inside of them. Fear, resentment, shame, humiliation, panic, anger, rage, embarrassment and guilt. For far too many, it is more than they can endure and they withdraw from family and friends and the society in which they live.

Some have a breakdown from which they never really recover. Some, unable to cope, take their own lives.

I must make a few things absolutely clear. Contracts should be honoured; debts should be paid as and when they fall due. For every willing borrower there has to be a willing lender. Prior to the Global Financial Crisis (GFC), Australia, like most of the developed world was awash with money. The Global Farmer explored the rise and rise in land prices in a previous article, ‘Self Inflicted Injury’.

The crucial difference in the philosophy of lending today compared to when I was a young man , over fifty years ago, is that these days there seems to be a complete lack of understanding with so many bankers that agriculture is a risky business. Their public face, which no doubt senior management and their boards see, is different to what happens in the real world. At least that has been the experience of the subjects of this story and I believe many more.

Many years ago, when agriculture was Australia’s biggest exporter and we had learned some bitter lessons from the evictions of the Great Depression, banks were set up in all states and federally, to cater for the special needs of primary producers, they understood risk.

It was recognised at that time by governments and the banking industry, that when all is said and done, farmers have different banking needs to the businesses on the high street. Put simply farmers, those who make a living from agricultural enterprises, from million acre stations to relatively few acres of horticulture, are different because they have no alternative but to gamble huge amounts of money on the weather and as exporters, put their faith and their produce on fickle international markets, which can be and are manipulated by the strong nations. Most of the world pays subsidies to farmers so they can manage the bad seasons and prices. Australia does not believe in subsidies.

When Australia entered the modern era of bank deregulation, rural banks disappeared and with them a culture of an understanding of agriculture formed by generations of experience in the bank and in government, but there was no room for that thinking any more.

Bob Hawke and Paul Keating are credited with moving Australian banking into what was at that time the modern Thatcher and Reagan theory of economics, which made rural banks and special purpose banks like the Commonwealth Development Bank (CDB) an anachronism in the face of what they believed to be progress.

In March of this year, several years work on behalf of a few dedicated farmers, academics and politicians failed to convince the Senate Economics Legislation Committee of the merits of a bill described as: The bill is a private senators’ bill co-sponsored by Senators John Madigan and Nick Xenophon. It proposes to amend the Reserve Bank Act 1959 to establish an Australian Reconstruction and Development Board (ARDB) of the Reserve Bank of Australia (RBA). The ARDB would have the task of forming and implementing a rural reconstruction and development policy. For the full report here.

If we had a bank similar to that proposed in the ARDB. A bank philosophy that recognised the special needs of farmers – that recognised there is a difference between running a business on the high street and one hundreds of kilometres in the bush that relies on the fickleness of ‘Mother Nature’, there would have been no need for this article.

Pain, distress, trauma.

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There can be few among us who have not witnessed the distress and trauma in the eyes, demeanour and behaviour of relations, friends and associates when they are confronted with the awful news that their creditors have appointed receiver managers.

They stumble and fall as they search for a quiet place to go through all the emotions that well up inside of them. Fear, resentment, shame, humiliation, panic, anger, rage, embarrassment and guilt. For far too many, it is more than they can endure and they withdraw from family and friends and the society in which they live.

Some have a breakdown from which they never really recover. Some, unable to cope, take their own lives.

Continue reading “The Scales of Justice are Broken in Rural Australia.”

The Farmers in Europe are Revolting

There is a paradox, an absurdity of enormous proportions happening in agriculture in much of the Developed world. In spite of the US$486 billion a year being paid to farmers in the 21 top food producing countries in the world – heavily subsidised farmers in the European Union (EU) have embarked upon a civil disobedience campaign, some of it has been violent and massively disruptive to the rest of society. Their problem is that in spite of being paid over US$100 billion a year in subsidies, they are going broke. Their costs are greater than their returns. Across Britain, France, Germany, the low countries – everywhere in Europe, mainly family farmers are saying ‘enough is enough.’  They are  taking to the streets and the supermarkets to show those who buy and consume the food what the difference is between what it costs to produce food, what the producers are being paid for it and what the consumers are paying for it at the supermarket. There is a sober lesson here for Australian agriculture as the value of the food we import goes up every year it is mostly from countries who subsidise their agriculture. According to the Worldwatch Institute, ‘Agricultural subsidies are not equally distributed around the globe. In fact, Asia spends more than the rest of the world combined. China pays farmers an unparalleled US$165 billion. Significant subsidies are also provided by Japan (US$65 billion), Indonesia ($US28 billion), and South Korea ($US20 billion).’

The value to Australian agriculture from Free Trade Agreements (FTAs) can be put into perspective when we contemplate having to compete against the home grown subsidised produce of much of Asia. If their ‘home grown’ produce, for instance beef, is subsidised, then to compete we have to be price competitive with a subsidised product – can we compete with subsidised agriculture? Only if we can sell at a price that is competitive, which may mean lower, than the subsidised product. For decades, since the seventies, Australian farmers have been duped by politicians of all colours and from agriculture, that ‘market forces’ and a ‘free market economy’ will eventually prevail. Fig 1 and Fig 2 (later) puts a lie to that propaganda and shows what it has cost. To compete we can see that Australian farmers ‘chased’ the ‘get big or get out’ mantra of the 70s with debt. More of that later.

As a child growing up in post-war Britain anything from Australian from wool to meat, to apples both fresh and dried, dried fruit and the delicious Sunday treat of Australian canned peaches, was a sign of absolute quality. The only exception to that rule was the processed cheese we were served in the army in the nineteen fifties. I am sure it had been imported during the war. Second World War, I think – maybe?

How times have changed. Britain is part of the EU, the European Union. This is what the EU say about themselves:

The EU is an attractive market to do business with:

  • We have 500 million consumers looking for quality good
  • We are the world’s largest single market with transparent rules and regulations
  • We have a secure legal investment framework that is amongst the most open in the world
  • We are the most open market to developing countries in the world

That is a proud boast and if you look at the link you will see the truth of it. They are indeed a powerful union – even a nation. To protect their agriculture the EU pays their farmers subsidies amounting to about US$100 billion a year.

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The team from Copa – Cogeca – Brussels.
In ‘Farming on Line’  a UK farming journal came this alarming news on Wednesday 29 July 2015. Copa and Cogeca warned at the EU Milk Market Observatory meeting today that the EU dairy market situation has deteriorated rapidly in the past 4 weeks, and without EU action, many producers will be forced out of business by Winter. Speaking at the meeting, Chairman of Copa-Cogeca Milk Working Party Mansel Raymond said “The market is in a much more perilous state than it was 4 weeks ago, with producer prices far below production costs. It’s a critical situation for many dairy farmers across Europe”.

Who or what are ‘Copa’ and ‘Cogeca’? ‘Copa’ was formed in 1959 to represent farmers within what we now know as the EU, it had 13 affiliates at that time. It now speaks in Brussels for sixty farmer organisation’s within the EU and another thirty six affiliates like Norway and Turkey, outside of the EU, but in Europe.

Cogeca? Straight off their website : On 24 September 1959, the national agricultural cooperative organisations created their European umbrella organisation – COGECA (General Committee for Agricultural Cooperation in the European Union) – which also includes fisheries cooperatives.

COGECA’ s Secretariat merged with that of COPA on 1 December 1962.

When COGECA was created it was made up of 6 members. Since then, it has been enlarged by almost six and now has 35 full members and 4 affiliated members from the EU. COGECA also has 36 partner members.

So ‘Copa & Cogeca’ to our antipodean ears may sound like a dance from South America, is in fact a very powerful agricultural lobby in Brussels and the Parliament of Europe. Stuck down here at the other end of the world we tend to forget that Europe is now a bigger trading bloc than America and China.

Vive la France !

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French farmers are a passionate lot and in support of Copa & Cogeca, last month on warm summer days in the middle of the tourist season they dumped loads of animal manure in the middle of Paris and other cities. For those who don’t know what the machine below is, it’s a ‘muck spreader’. Normally filled with animal manure and coupled to the power take off on the tractor it ‘spreads’ the manure on the fields or paddocks. In this case it looks like it is being used to ‘clean’ windows – on a bank perhaps?

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Continue reading “The Farmers in Europe are Revolting”

A Lidl of what you fancy does you good.

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Photo: Oxygen IE

European Bank Subsidised Lidl Expansion with A$1200 million.

This article owes its origins to an intriguing report originally published by GRAIN. You will see why I found it intriguing when you get to it. I have spent some time on the Global Farmer discussing agricultural subsidies, little did I know and I’m sure you didn’t, that the Guardian Newspaper recently revealed German discount supermarket giant Lidl and its sister chain Kaufland have benefited from almost US$900 million (A$1200 million) in public development money over the last ten years. Is this just another form of subsidy to encourage the global expansion of European supermarkets and European food?

The companies, owned by the large retail company Schwarz Group and controlled by one of Germany’s wealthiest families, received loan funding from a little-known wing of the World Bank and from the European Bank for Reconstruction and Development (EBRD). There is no suggestion there was anything ‘wrong’ with the funding, as you will see it is part of the specific mandate of these organisations funded by taxpayers and owned by governments to encourage local development, in this case in Europe.

The German Federal government, on their website has been heavily promoting both Lidl and Aldi in America to help it to become established in that country and, no doubt, sell food that has been made or produced in Germany. Lidl like Aldi, also sell a range of German made hardware, electrical goods and many other things.

Aldi already have stores in Australia and it is understood they plan many more. Lidl are also planning a chain of stores throughout Australia. In what seem like a few years in the UK they have secured over 10% market share and are causing both Tesco and Waitrose, the two biggest food retailers in the UK, to review their business plans.

They have made no secret about being ‘aggressive’ with their entry into America. Maybe interesting times for the Australian consumer, but what about the producers and what few processors are left, what of the future for them?

Continue reading “A Lidl of what you fancy does you good.”

Not the last word – MCPI #3

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Below is an email I received on June 3 from Jay Horton from Strategis Partners, the company that is promoting Multi Peril Crop Insurance. I have attached a copy of the spreadsheet to the email I sent to you informing you of this article. I hope it works, if not then write me in the comments section at the end of this piece and I will forward it to you.

I circulated the email among consultant friends and I have to say that none have been enthusiastic. One said he could see ways of taking advantage of the proposition. Some of the comments I cannot repeat. Let’s say they were from non-believers. But here is a sample of the comments and questions about the commercial proposal to provide MPCI:

  • Fire and hail is only 1% or $5/ha compared to $$21/ha. Do not tell me that isn’t an extra cost.
  • It will happen(government assistance) and I wish I could have that sure bet on it.
  • Benefits are imaginative. In risky areas where the cover would be most useful the premium will reflect the risk.
  • I fail to see why interest is saved. We normally pay insurance (F + H) after harvest. I am sure they will require payment before.
  • What about the interest on extra inputs?
  • Real cost $32,000 net of saved insurance. You could get the yield by extra inputs anyway, nothing to do with insurance.
  • For every winner with forward pricing there is a loser. Is the farmer better at this than the speculator? In the end forward pricing is a COST. Frankly it has to be to pay for the broker of the deals. Otherwise everyone would be in on the act. It is only sensible when prices are towards to top decile as currently with wool. How much can you cover forward anyway, safely? (Remember this was written early June, just this morning wool has continued to go down and wheat up. It needs an expert to comment but I have noticed the Shanghai Stock exchange has taken a hit over recent times. Once again China controls the market this time in wool. Ed)
  • Only a % of the output is covered. 70% as I read it. To me that business will have a serious loss if only 70% of the proposed output is achieved.
  • Jay relies on security of income to make business decisions that could or might pay off. Returns from extra inputs. Forward pricing. True should they work but they are not assured. Observe Canola prices this year. Early pricing, which looked pretty safe has been eclipsed. Do you hedge currency as well?-you should at extra cost.

End of comments. I welcome comments from farmers and anyone else in agribusiness. If in this article I have missed something, then tell me. Same goes if you think I am wrong.

Continue reading “Not the last word – MCPI #3”

Live cattle exports – Is there a future?

With yet another report of Australian cattle being mistreated in a foreign slaughterhouse, this time in Israel, the question must be asked whether the export of live animals from Australia is sustainable? Not only is it sustainable as far as numbers are concerned, particularly following the dreadful drought in Queensland and New South Wales, which has decimated numbers . We need to consider that between February 2012 and June 2015 there have been sixty ESCAS Regulatory Compliance Investigations. All have been or are being investigated.   The Federal Dept of Agriculture, Food and Fisheries (DAFF) who pick up the bill at present, have served notice on the exporters that they are going for cost recovery. In other words the exporters are going to pay. This is government policy throughout Australia—the user pays. No other country involved in the export of live animals has an Exporter Supply Chain Assurance scheme (ESCAS) type scheme.
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A common sight in Vietnam. How do we stop generations of habit? Only the mode of transport has changed. The animal is alive and destined for some village somewhere far away from ESCAS.

The Australian Livestock Exporters Council (ALEC) CEO Allison Prescott has been telling the international press that a significant investment is being made in building and upgrading slaughtering facilities and feedlots in Vietnam and exporters from Australia were expecting the trade between the two countries to continue to grow into a long-term and sustainable market. The question must be asked, who pays for the upgrades? And where are the cattle going to come from?

Continue reading “Live cattle exports – Is there a future?”

Multi Peril Crop Insurance. Part 2.

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I received the following paper from Ben Rees, who is an economist and farmer, or farmer and economist, not sure which comes first these days. A man with many decades of experience in the economics of agriculture, Ben is deeply involved in the debate on the future direction of Australian agriculture.

The last paragraph in Ben’s paper, which questions the legality of MPCI, should cause the promoters of MPCI to at least ponder and then ponder again. Particularly Mr Tehan.

There is interest and support in high places of government for MPCI. Has MPCI been politicised to gain support among the electorate without the proponents explaining the cost? Certainly this graph is a few years old but the trend line is obvious, maybe if it has changed direction you will let me know? By that I mean whether there is sufficient above the line to afford MPCI.

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You can read how deeply concerned Ben is about agriculture and particularly the drought situation in Queensland and NSW by going to:

Opinion: Why drought aid is a travesty of policy

Roger Crook

Roger,

The Senate Economics Legislative asked me a question on notice at the Inquiry on March 18th. The question was to compile a short note on multi peril crop insurance. It appears that the House Economics Committee led by Dan Tehan from Victorian Western Districts is pushing it. Also the policy panacea White paper will recommend it.

This attached note was subsequently submitted and accepted by the Senate Economics legislative Committee. It should have been incorporated in Hansard. I do not know if you can publish; but, at least you know it is being pushed at high levels.

cheers

Ben

I have checked and it is legal to publish, as it has been published by the Parliament of Australia.(Editor)

Continue reading “Multi Peril Crop Insurance. Part 2.”

Multi Peril Crop Insurance

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Bob Hall is a well-known agricultural consultant based in Darkan, Western Australia.
Back in the sixties Bob challenged us all about the way we managed our merino sheep.
There was nothing theoretical about Bob’s challenges. They were based on sound, practical and proven experience gained through working with his clients.
Bob offered solutions stretching from sheep yard and shearing shed design, to management practices designed to improve the efficiency and profitability of growing merino wool, which are still, maybe even more, relevant today.
Bob now manages a broad portfolio of consultancy covering all aspects of farm management in the wheat sheep belt of Western Australia. Here he presents his views on a hot topic of the day, Multi Peril Crop Insurance.

Continue reading “Multi Peril Crop Insurance”

Can we live without China?

 

The Changing of the Guard.

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Every picture tells a story.

Preamble.

Over recent times as Australian agriculture has endured droughts, poor prices and incompetent governments; amid the chaos there have been two major overriding topics for discussion.

The first has been trying to separate the rumours, the gossip and the chit chat from the truth regarding the extent, the size of Chinese investment in Australian agriculture, in land, as distinct from agribusiness or food processing. 

There is a body of opinion that claims Chinese interests, including Sovereign Funds have made substantial purchases of land in Australia, using a variety of investment vehicles, which have enabled them to avoid scrutiny by the Foreign Investment Review Board (FIRB).

We have the figures from the FIRB and we name who the biggest investors in Australia agriculture have been over recent times and the results will surprise you. China is at the bottom of the list, below Hong Kong. So why the public and in some cases political interest in China who ‘officially’ appear to be a minor investor? Is it xenophobia, fear, nationalism? — they all mean the same thing really. Do we fear China and is that because we don’t understand them? Whose fault is that?

These are difficult questions for us as a people and as an industry. It is a far more serious question for the media, and I believe the media should shoulder a great deal of the blame, because they have wrung every bit of emotion they can out of China and Chinese investment in Australia, giving voice to rumour and innuendo.  Yet the records show that the media have been at least less than diligent and probably lazy in failing to report who the big, billion dollar plus, non-Chinese investors have been in Australian agricultural land over recent years.

The second big question is, forgetting agriculture, can we now manage, as a country, without China? We have all but exported our manufacturing base, everything from engineering, to clothing to hardware to food processing — you name it, what we once made ourselves we now get from China.

If it’s ‘Made in China’ it’s designed to be affordable. The more we buy from China the more dependent we become on them and the more vulnerable we are as the alternatives become uncompetitive.

The resource boom of the last last decade should have made Australia strong but there’s a fly in the ointment, Barclay’s Bank Kieran Davies reports that Australian household debt is equal to 130% of Gross Domestic Product (GDP) this compares to an average of 78% average across the advanced world making us more vulnerable than most to another financial crisis.

So we’ve spent the boom on paying ourselves wages and salaries big enough to build the biggest houses in the world with ‘entertainment centres’ and a bathroom for every resident, double garages to hold the boat and the dual cab 4wd ‘trucks’. Enough left over to holidays to exotic destinations and the like — instead of spending our money on our country, on the infrastructure future generations will need to make us world competitive.

China is now the world’s largest economy. America will fight them for that position — but no matter what happens, China’s influence on the Australia will continue to grow.

Australia’s challenge will be to find the point of balance in our relationship between our greatest ally, America, and the country we cannot manage without — China.

Continue reading “Can we live without China?”

WHY IS IT AUSTRALIA DOESN’T CARE ABOUT THE DROUGHT.

Prologue

Why are stock dying in the north of Australia from starvation when there is plenty of stock food in the country? For the same reason, I suppose, that thousands of people all over the African continent and in refugee camps in the Middle East, especially children are dying every day from starvation and deprivation while there is no shortage of food in the world. If we are honest with ourselves, the majority of us, as we fill the larder for Christmas, just do not care. The statistics say that after we have finished our celebrations, we shall throw away half of the food we have bought.

There is a story of Bono of at a U2 charity concert, must be over ten years ago now, quietened the crowd, raised his hands above his head and clapped his hand together once. Three seconds later he did it again, and then again and again every three seconds. The, crowd, I think it was in the Albert Hall was quiet. Very gently he spoke and said, ‘Every time I clap my hands together, every three seconds, a child dies in Africa’. Someone in the audience shouted ,’Well stop f*&$#@ng  clapping then.’ The crowed booed. The money raised went to help the children in Africa yet to this day they still die of starvation.

There is nothing I can add to the disaster that is the drought in Queensland and Northern New South Wales, except to say as a nation we have always been able to find millions of dollars to help people in other countries to survive and recover from natural disasters like earthquakes  and tsunamis and as a nation we have been proud to help.

Now we have a disaster as bad or worse than any we have helped in other countries going on right now in the north of our own country and it seems we cannot come to our own aid. I ask the question why and who gives a damn about a deficit or a surplus budget when the heart of our northern agriculture is suffering unimaginable hardship? It is a situation that could  be substantially ameliorated, made unimaginably better even fixed by spending money, government money, our money.

Irrespective of one bank agreeing not to foreclose and threats being made to name and shame, and high profile media people giving their support to the beleaguered landowners, the drought remains, stock continue to die. The Intellectual property of ‘Agriculture Australia’ is substantially in the genetics of the stock we have bred over many years. That gene bank is among the best in the world, it is priceless and will take years to replace.

One of the great shames of the unnecessary ‘selling off’ of the Australian merino flock for meat, is that some of the best wool producing genetics in the world finished up as Ugg boots, sheepskin coats and on the barbecues and in the cooking pots around the world.

The task before us now is to feed the stock that remain,  we have and stop the death from starvation of Australia’s greatest asset, the gene pool of Australia’s national beef herd that has taken generations to build and which is in the process of being unnecessarily lost for all time.

During the week I had this web address sent to me.

If you haven’t seen it, do so now, before you read what follows.

Continue reading “WHY IS IT AUSTRALIA DOESN’T CARE ABOUT THE DROUGHT.”

Q. How unlevel is the ‘playing’ field? A. It’s a hill.

It has been difficult for me to be true to the name I gave this web site  ‘Global Farmer’ In Australia.  I chose the name because, 1. I had used it before and, 2. Because there is so much going on in the world of agriculture and agricultural trade that we never get to hear about. We are traders, or at least we have many traders living in our midst. We now know why they are keen to be here because there is more money in trading in grain than there is in growing it, and according to Rabbo Bank boss this is the most expensive country in the world to grow wheat. So we have a few challenges in front of us.

I have the time and I have the intense interest in food trade and objective to see Australian agriculture, once again, world competitive.

We really are a small player in world agriculture. We grow just 5% of the world’s crop. We jump up the ladder as a trader where we come in at between 12 and 15 in world rankings. That’s why the big boys want to play here. If you live 200km from the port it’s costing you between $60 and $75 a tonne to get you grain to port.

www.aegic.org.au/…/supplychaincosts-impact-global-competitiveness.a…

I know we are a world leader in the export of beef but I’m looking for a volunteer to tell the full story. From what I am told we could do so much better both domestically and for export.

One of the reasons we don’t get a lot of international news is because we are obsessed it seems to me, with domestic politics and in agriculture with domestic agricultural politics. It is hard to imagine an industry with so many organisations, committees, Peak Bodies, and people who claim to speak for one particular group or another, gossipers and rumour mongers. Yet in spite of that, we are deeply dependent on the export markets for our commodity products, cereals, meat and wool and to a lesser extent on perishable goods, fresh fruit and vegetables. Quite fascinating that WA is exporting fruit and veg to Bali, maybe it reduces the Bali Belly? Continue reading “Q. How unlevel is the ‘playing’ field? A. It’s a hill.”