Water Week

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SA farmers pre-sell crop; told – at $200 per tonne, forward sell; one sold 3,000 tonnes barley at $200; price now $370, no water, no barley, he’s bankrupt

Posted by waterweek on 17 September 2007

Ivan Venning, Member for Schubert, told the House of Assembly, South Australia, 11 September 2007 said the drought was so severe “.. we are already seeing foreclosures by many of the banks. To make matters worse, we have another anomaly, which is a most unusual situation of the washout of contracts”.

Farmers to pre-sold their crop for the first time; “It is not because of deregulation; but deregulation of our industries, particularly barley, has caused many farmers to pre-sell their crop for the first time. We are told by experts to get advice and, particularly with barley, if it gets to $200 per tonne to forward sell. I know of one farmer who forward sold 3 000 tonnes of his barley at $200 per tonne, and now will not grow a single grain.

Banks are refusing to finance: “ The problem is that the price of that barley today is $370. That farmer has to go and buy 3 000 tonnes of barley for that contract at $370, and it is washed out at $200. That is what is called a `washout’. You do not need to be much of a mathematician to see what that adds up to. That adds up to a massive amount of money plus, in some instances, there is a $40 per tonne penalty. That is horrific. To make it worse, the banks are refusing to finance these washouts.

Drought subsidies not enough: “EC funding is available to a lot of these farmers, but it will not save many of them because of the immensity of the problem. It also affects all other areas of agriculture, not just the grain growers I am involved with. It affects the viticulturalists, the grape growers, the graziers and the haymakers. It is affecting everybody across the whole board, including the rural communities that support them, particularly the agents and the machinery manufacturers. Everybody is involved, even cities such as Whyalla. It is affecting everybody”.

Reference: Ivan Venning, Member for Schubert, House of Assembly, South Australia, 11 September 2007.

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