By Chris Spindler
The current drought throughout farming regions in parts of South Australia, Western Australia, Victoria and particularly in NSW and central Queensland is close to the worst this century. Forty five per cent of NSW has been drought declared and no relief is in sight for central Queensland.
Even if rain does come now — as it has in some areas — wheat estimates are already below average. The expected harvest of 13 million tonnes is 5 million less than last years' 18 million. Barley is expected to be half of last year's harvest, and without rain soon, cotton is also expected to be halved from last years' crop.
The drought, which has continued in some areas for four years, has brought terrible hardship. For example, in central Queensland's grain area, few farmers have recorded any profitable harvests for this period.
While finance markets bemoan the billion dollar loss to exports, the drought could signal the end for many small and family farmers.
Restructuring for agribusiness
However, farmers' problems, while accentuated by the drought, really start with the restructuring of the agricultural sector in favour of big business. This is clear from a review of federal Labor's rural policy.
Firstly government response to the drought has been pitiful. According to Paul Keating: "Drought is around now all the time. So let's try and cover this as a normal recurrence of rural life and use the Rural Adjustment Scheme (RAS) to manage it".
However, since 1992 when Simon Crean, then the minister for primary industries, changed the RAS guidelines, it has been criticised for not doing what it was set up to do — helping the most needy farmers.
Only farmers who are seen as "viable" in the long-term can apply for help from RAS. This means that between 10 and 25% will not receive assistance.
There are four ways to qualify for RAS: to embark on property improvement such as irrigation, sustainable farming practices or even buying more land; to undertake management advice or to better business and farm management skills; to seek interest rate subsidies of up to 100% in exceptional circumstances such as drought or commodity price slumps; and to take out re-establishment grants of up to $45,000 (subject to asset testing) to leave the industry.
Recently released Australian Bureau of Statistics figures for farm debt shows that the average debt per farm was $145,000 in 1992-93, a total of $15.4 billion for the rural sector. The poorest 25% of farms have an average debt of over $500,000. When measured by RAS guidelines, many such farms would not be considered viable.
The direction of RAS is clear. It is not a scheme to assist farmers to stay on the land, but a means to the restructuring of agriculture in favour of agribusiness and larger farms.
Those with the highest debt and with no immediate prospect of expansion cannot get RAS. As one commentator put it "for some it is accepting the inevitable".
Of the 1993 total of 31,000 applicants for RAS 18,000 were rejected, 9000 accepted and the remainder are pending. Half of those applying for re-establishment grants to get out of the industry were rejected. Of course these figures do not include those who did not apply because they knew they were "not viable".
On a state level too assistance is abysmal. Seminars, a rural resource book, help from the National Farmers Federation (NFF) for overseas marketing and funding for financial advice was South Australian premier Dean Brown's promise to the recent South Australian Farmers Federation conference.
Some interest rate relief for the under-30s who want to get a start in farming was the only monetary assistance offered.
Productivity
Some rural commentators argue that increasing productivity is key. They say that "productivity is the buzz word in industry, government and the trade unions and it should be in agriculture too".
The stated aim is to become internationally more competitive. Small or family farms are supposedly viable if a more aggressive management style is adopted. For this school of thought, small-size, under-mechanisation, low commodity prices, unsympathetic governments, international trade distortions and even drought or flood are not the main reasons why sectors of agriculture become unviable.
Unfortunately for most farmers these commentators' definition of viability is a dream. For example, for a broad-acre farm to be viable it ought to have a cash income of at least $50,000 per year and debt should not be more than 1.5 times annual farm income. Only the top 25% of broad-acre farms will meet that criteria this year.
What about the other agricultural producers? According to Bureau of Agricultural and Resource Economics (ABARE) figures no single one type of farm — whether wheat-grain, sheep, beef or mixed — recorded fully-accounted profitability in any of the past three years.
Cash incomes varied widely, ranging from $16,800 for sheep properties to $81,800 for wheat grain properties. These figures are even worse when it is considered that family labour and depreciation are not taken into account. Once this is done a vast number of farms would have negative incomes.
By contrast, the top 25% of farms have on average double the cash income of the overall average and some 20 times that of the bottom 25%. The leap in productivity for the top 25% of farms, who fit neatly into the "viability" criteria mentioned above, has largely come from the advances in technology, economies of scale and access to markets — the very factors that are inaccessible to many ordinary farmers.
Agribusiness rules
It is no surprise then that many believe that the family farm is economically unviable. And while governments fail to adequately support small farmers and rural communities this is largely true.
The direction of agriculture is for the major players to continually take over smaller non-viable producers. For example, Australia's agricultural sector is largely dominated by two major corporations with international connections, Elders and Wesfarmers.
Surprisingly equal in the market (both have an annual turnover of approximately $2.5 billion) they together account for half of rural agency sales. Their tentacles reach into land sales, finance, machinery and fertiliser, yard sales, food production, transport and export sales.
Increasing rates of contract farming ensure that farmers are not only susceptible to price increases on farm inputs and food processing, but begin to lose control over farming practices on their land.
Given that the grazier-dominated NFF supports the restructuring of the industry and accepts that at least 25% of small farmers ought to be restructured out of agriculture it is hardly surprising the NFF has had a decline in membership.
The NFF, through its state bodies, represents less than 50% of potential farmer membership. This is not impressive given NFF's claim to speak for all farmers. For example, the New South Wales Farmers Association, seen as the strongest and wealthiest association, has had a drop in membership of over 6000 members in five years with no sign of the trend stopping.
Farm producers need representatives who will campaign to break the stranglehold of the banks and finance corporations. Farmers should be given a minimum income and debts should be rescheduled or cancelled.
As well, the pricing of farm inputs needs to be monitored and the continued privatisation of marketing boards should be reversed. Only then will we be able to talk of viability for the smaller agricultural producers.