Buying the farmer's vote

I hope many of those with their hands out for assistance get out of farming...

WHEN other people’s money is being thrown about with more than usual gusto, it is usually a sign that an election is not far away. Hence last week’s announcement of assistance to farmers “struggling with acute levels of debt”.

The assistance comprises low interest loans, more rural financial counsellors, an attempt to establish a nationally consistent approach to farm debt mediation, modifications to Farm Management Deposit rules plus loans to state governments to deliver the concessional loans.

Although theoretically national in scope, it is primarily aimed at farmers in WA.

Why are debt levels “acute”? The government says it’s because of the high dollar and depreciation of land values. WA property values are declining because of a run of poor seasons leading to a surplus of properties for sale.

The banks are naturally cautious about lending more money against depreciating assets, so some farmers are struggling even to fund the purchase of seed, fertiliser and chemicals to allow them to put in a crop.

The loans are subject to viability criteria and must be repaid within two years, which will necessitate access to commercial funding by then. Many of those who can’t raise bank finance now won’t be able to in two years’ time. And even if they qualify for a government loan, should this year’s crop be poor or prices low, the government could end up applying its own mediation rules to negotiate the forced sale of properties.

In fact, the more you look into this assistance package the more you realise it is primarily window dressing.

The farms that most need the loans will fail to qualify for them. Neither the exchange rate nor property prices will be affected by them. Increasing the number of rural finance counsellors from 110 to 126 will hardly be noticed. Standardising farm debt mediation won’t change much. And the changes to FMDs will predominantly help those who generate off-farm income.

As for the loans to the states, that looks like a formula for another blame-shifting argument. Why should a state government be required to repay the funds it expends on delivering a federal government loan program? Loans to farmers will (mostly) be repaid, but the states won’t be able to recover their costs.

But if it is window dressing, why is buying the votes of farmers important? There are not that many of them and most are located in safe Coalition electorates. Where is the political risk to a federal Labor government in leaving it all to the states?

An intriguing aspect is the involvement of Bob Katter in the announcement. Described in Queensland as “all hat and no cattle”, Bob is a fervent agrarian socialist. As far as he’s concerned, introducing EU-type farm subsidies should be just the beginning.

The Gillard government has been schmoozing him lately, with the result that he has voted for or avoided voting against certain key legislation. His new party is also predicted to steal votes away from the Coalition, so these announcements may be mainly intended to keep Bob happy.

I hope that’s the case and, as a result, very little money goes out the door.

I have a friend who drives buses in Sydney. It would be ludicrous if his taxes were used to lend money to people he has never met, in a state he has never been to, who have already borrowed more money than they should. Especially with millions of dollars in equity in CBH inaccessible because of foolish notions about grower control.

In fact, I hope many of those with their hands out for assistance get out of farming and take up driving buses, and Bob Katter joins them. They might then have more respect for other people’s money.

  • David Leyonhjelm has been an agribusiness consultant for 25 years. He may be contacted at reclaimfreedom@gmail.com
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    READER COMMENTS

    Top Ender
    30/04/2013 8:10:21 AM

    Those who can do, those who can't consult.
    torobrook
    30/04/2013 8:24:11 AM

    Brilliant. David, your summation is absolutely correct.
    Boris
    30/04/2013 8:28:54 AM

    Brilliant article David! It appears in WA that agrarian socialism is alive and well, most don't realise they have the condition but those that oppose its destructive force see it all so clearly. You rightly point out that demutualising CBH is the only option to reduce the toxic debt in the WA grain belt. The million dollar question is 'will the penny drop with the apparatchiks of CBH or will they be forced off the land with $2.00?'
    Real Farmer
    30/04/2013 8:37:38 AM

    The old story about the chicken and the pig discussing the farmers breakfast and who should have more say. Of course the chicken is involved, but the pig is committed. David Leyonhjelm, like so many "consultants", is barely even a chicken in this debate. I agree the farm finance package is misguided, but only because the Govt is missing the point. Aggressive fiscal management to bring down dollar would benefit farmers and every other export related business in the country. Moving the currency to 95c would deliver about 3bn benfit to the ag sector and improve the Govt bottom line in one go.
    seethelight
    30/04/2013 9:50:41 AM

    Aggressive fiscal management as recommended by Real Farmer used to be recognised as debasing the currency by increasing the money supply. The Japanese Government has signalled that it is going to double its money supply in the next two years.The US Government is creating new money at the rate of $85 billion a month.Perhaps we should not encourage our politicians to be too 'aggressive' until we see how it works out.It didn't work too good when it was tried in Zimbabwe.
    Logic
    30/04/2013 12:00:32 PM

    The money would be better spent opening markets and building infrastructure that farmers badly need to be competitive
    abimax
    30/04/2013 12:01:35 PM

    CBH provides infrastrucutre and faiclities to their farmer members at lower cost than fartmers pay in the Eastern States. CBH funds are accrued to maintain the infrastructure for long term. This is counter productive short term thinking - the long term costs of the loss of CBH will be higher than the short term gains just look at the costs in NSW and Qld. There is always some consultant who wants to make a dollar asset stripping co-ops and mutuals to the long term detriment of the community.
    ecnerwal
    30/04/2013 1:07:35 PM

    David L, some of your ideas make sense. Lending money to a business that is already non viable is mad. However the nation needs viability in agriculture.Farmers and Government need better policies. Stop knocking the policies that have stood the test of time. CBH WA for example has. Focus on the policies that have failed farmers. Recognise the potential value of food production to Aust. Farming is 99% Aust owned. At least give it incentives and encouragement and counter the market corruption and tarrifs our farmers face in international markets & regulation at home. Subsidies not needed here.
    x
    30/04/2013 4:28:39 PM

    David, by a majority ( a democratic vote ) WA growers voted two years ago to retain a CooP, yes some WA growers are struggling but the net negative impact in relation to increased charges and service rationalisation following a CBH Public listing would be far more detramental on WA growers as a whole. If listed ,shares given to growers in trouble would go to the bank , it would not solve a fundamental terms of trade issue
    Inverell
    1/05/2013 8:21:20 AM

    Good Summary David. This is a PR stunt by the Govt. No one will be able to get support, but it has been widely publicised in the City media. The general pop will believe that the Govt is helping farmers again, when in fact they are doing nothing. This treacherous Govt has sabotaged our livestock markets to gain a few city votes at all AU farmer’s expense. Have a look at Mutton prices at present, disgraceful! The Govt has destroyed our profitability!!!
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    Agribuzz with David LeyonhjelmCommentary, news and analysis with agribusiness consultant David Leyonhjelm. Email David at reclaimfreedom@gmail.com

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