Christopher Back (WA, Liberal Party) Share this | Link to this | Hansard source

I rise this evening to inform the chamber of the crisis which has unfolded in the Western Australian wheat belt during the last growing season and the summer subsequently. This is been caused, regrettably, by seasonal conditions. One of the great ironies is that rain did not fall during the growing season but fell at the end of the growing season, only interrupting harvesting. In most circumstances people will reflect on 2012 and they will say that it was an average rainfall year. Regrettably, the rain did not fall during the growing season, it only fell at a time to interrupt the harvest and cause further grief for the producers in those areas.

I had the opportunity two weeks ago to travel through our eastern wheat belt, convening meetings in the towns of Southern Cross and Merredin and in the Avon Valley, and was enormously distressed to speak with old friends, farmers I have known for many years and their spouses and children, and learn that somewhere around 65 per cent or even more of Western Australian farming land in our eastern wheat belt areas is on the market, or indeed would be on the market if only there were buyers. In many instances the circumstances are so severe that the banks are considering whether they will even forward loan funds this year for these farmers to put a crop in.

In our industry, over time, if a farmer did not have somewhere between 80 to even 85 per cent equity in his farming operation, he was regarded as being at risk. To a city or town based businessman, having that high a level of equity in a business would be regarded as lazy money, but so risky and so variable is the operation of broadacre farming particularly that, to be able to overcome seasonal conditions, a prudent farmer would have those levels of equity. I have been informed in recent times by farm advisers and others that those equity levels are now down at around 60 to 65 per cent of their farming operations. These are dangerously low figures of equity, particularly when that farmer goes to the banks to try to borrow for this season's cropping year.

To give the chamber some understanding, such is the size and scale now of farming properties in our eastern wheat belt that it is not uncommon for a farmer to spend up to $1 million to put a crop in by the time they use seeds and weed sprays, pay for fuel, pay the cost of money, pay for their seeding operations and, of course, defray the capital costs of the very expensive equipment that they use in the farming operation. A bank manager spoke to us in a forum in Merredin last week. Somebody asked him, 'Isn't it similar that the mining operations also inject huge amounts of capital?' The bank manager by way of answering said, 'Yes, but it's the case that, by the time a farmer puts the crop in and takes the tractor out of the paddock, the net value of that whole investment is zero'—because, of course, if it does not rain, if the plant does not sprout, if he has not got a harvestable product, he has actually wasted the entire amount. By contrast, in a mining operation the miner who might invest $1 million will obviously have something. The ore is under the ground; the opportunity is there. Prices may drop or prices may increase, but the actual ore itself is there and that person will recover at least some of that particular investment.

My biggest concern as I go around the farming areas is seeing the despair of younger farmers and their spouses. They are saying to me: 'Chris, why should we stay in farming? What's in it?' The returns per dollar invested are very, very low. One older farmer said to me the other day, after a particularly severe dust storm in the town of Southern Cross, 'I just watched my superannuation blow away from my paddock to my next-door neighbour.' So I am particularly concerned. I know many others are too. What are we going to do? How do we create a climate to attract and keep younger farmers in the business?

One of the areas that I am particularly attracted to is the concept of what is known as risk managed crop insurance. It is not something that has been a feature in Australian agriculture over many years. By contrast, in the United States, in Canada, in the grain-growing areas of Europe and South America and in South Africa it is quite common for a farmer to invest in insurance against matters such as hail, which is something that has been insured in the past. But the two big ones are frost and drought. To date, the prices have been such that it has not been an attractive option. We have not had the size of insurers willing to insure the crops. For the first time ever, it now seems as though we have got one or two overseas insurance companies well experienced in the field of agricultural insurance who are indeed looking positively at offering this form of insurance. They are companies that know the Australian agricultural system well.

For those of you not familiar with technology, it is an interesting lesson. When a crop is put in these days, the whole operation is controlled by computer analysis with GPS. The paddock has already been scanned from the last time a crop went in, so the amount of grain and fertiliser going into the ground varies almost per metre depending on the fertility of that soil. Indeed, when the crop is harvested, the same information is captured. So these insurance companies now, with their satellite technologies and all of the information available to them from cropping history, are actually able to predict quite accurately what a farmer is likely to yield from his paddocks.

I for one am very hopeful that we will see risk managed crop insurance become a feature in Australian farming. In fact, one of the insurance companies was telling us recently that they insure more than 109 crops in their overseas operations: wineries, vines, horticultural operations, broadacre farming et cetera. It is something that I certainly will be strongly encouraging.

In addition to the farmers themselves it is, as you would know, the demise of our rural communities that causes me an enormous amount of angst simply because, as the farming community does not have the capacity to be able to pay their debts, so the circumstance flows through to the town, where the businesspeople in the town themselves do not have it. The farmers leave the community, businesspeople leave the community, the number of children available in the school decreases and the justification for having a police station or other services such as bank branches et cetera obviously collapses. So, therefore, we see yet again the fundamentals, the pillars of our smaller communities, being lost to us. Over time many of our farmers have gone from being those who have produced both crops and animals—livestock, sheep and cattle—to being crop only. They then are terribly at risk in the circumstance that their crops fail.

Naturally enough, as I have said before in this place—in fact, as I spoke of earlier this evening—with the demise of the live export trade now and the fact that there are no prices left in the competitive market for sheep, particularly in the southern part of my state with cattle across the north of the Northern Territory, Queensland and Western Australia, we are now faced with a circumstance that animals that should have been sold, that should have been on ships, that should have been in the eastern markets or overseas, are now on farms. There is no feed left on these paddocks. They are dust bowls. We travelled through Merredin the other day in the middle of a dust bowl caused by sheep that should not even be on the farms. They should have long been sold. And so we have a circumstance that is absolutely dire. I for one am hopeful, as everyone else is, that we do have a season in 2013. Otherwise, we are going to have a very significant walking off of farms here in Western Australia.

Finally, with some pride I want to acknowledge in the public gallery this evening my daughter, Elizabeth, and her partner, Mr Peter Hoyer, who are visiting from Houston in Texas with my one-year-old grandson, who must not have thought much of my presentation, because my wife has already removed him from the chamber!