Mixed messages on dairy aid delays help

In late April this year, suppliers to major milk processors Murray Goulburn and Fonterra were hit by a dramatic drop in the farmgate price, leaving them in debt to the companies. 

The federal government responded in late May with a $550 million package, which included access to $55m of dairy concessional loans for MG and Fonterra suppliers.

At the time, of the state’s 252 dairy farms, about 60 supplied to MG and six to Fonterra.

Four months on and only two SA dairy operations have applied for loans, with one approved.

SA Dairyfarmers Association president John Hunt was concerned farmers weren’t applying for the assistance because of the way applications were being assessed.

He said dairyfarmers were being told business assets, such as water entitlements and livestock, were not able to be included as security for the loan.

Mr Hunt said the inability to use water licenses as a form of collateral for the loans was disadvantaging SA dairyfarmers, with no similar stipulation in other states.

“If you take water out, it cuts people’s equity in half,” he said. 

This comes months after a federal audit showed SA farmers applying for the Farm Finance and Drought Concessional Loans scheme were missing out.

Only 1 per cent of those that applied to the scheme were successful, accessing $3.7m of the $60m available.

Just six SA farmers were among the 730 successful loan applications.

A PIRSA spokesperson said the loan scheme frameworks, including criteria, were determined by the federal government, with the state government required to administer the applications within those guidelines.

Australian Dairy Farmers president David Basham said the differences between how each state was interpreting and assessing the guidelines meant many farmers were missing out on much-needed help.

He said the low number of applications was due to the information being told to farmers.

“Farmers out there are self-assessing or making inquiries beforehand and told not to try,” he said. 

“It’s a real issue, we need to get that money out there to support farmers.”

Some SA dairyfarmers have been told water licenses are not able to be used as an asset when assessing the farm business’s security, which would rule many out.

SADA president John Hunt and chief executive officer Andrew Curtis recently met with PIRSA to discuss the issue and were also told water licenses could not be used.

When Stock Journal approached the department for comment, a PIRSA spokesperson said the state’s water licenses were regulated by the Natural Resources Management Act. They were not personal property, able to be registered as a security interest by a financier or other party.

“But the state government can and does take into account water licences when assessing property value as part of a concessional loan application,” the spokesperson said.

“Under the loan scheme, farming land in SA is valued on a fit-for-purpose basis – meaning it includes a premium value based on the landowner having the necessary irrigation infrastructure and statutory approval to apply water on the land.”

Mr Hunt was concerned about the conflicting messages getting out to industry.

Only a small number of applications have been submitted to PIRSA, but Mr Hunt believes there are more people who could benefit from the support, but are being held back by extra red tape.

Mr Hunt said talk of an inability to use water licenses as a form of collateral for the loans was disadvantaging SA dairyfarmers, with no similar stipulation in other states.

 "The government offers a potential support with one hand and then seems to take it away with the other,” he said.

“A lot of people are self-assessing and not applying.”

He said this would rule out many people who may otherwise be good candidates for the concessional loans.

Mr Hunt said the government trying to place the focus on “good operators” avoided this being used as “loan of last resort”, but a refusal to allow water ruled out most farms.

“Most farmers I know in the South East wouldn’t have a shot at it,” he said.

A second guideline, which does not allow stock to be used as collateral, is also disadvantaging the next generation of farmers.

“This rules out most young farmers,” he said. “I think people will drop out of the bottom.

“It shouldn’t be this hard to make money out of food.”

Mr Hunt has met with representatives of PIRSA to try and find a way forward and would like to see a solution, quickly.

“Farmers are struggling,” he said. “It’s no fun out there when we’ve got milk payments of $4.46 a kilogram milk solids.

“It is very frustrating for farmers as they have this carrot dangled in front of them, and can’t reach it due to crazy regulations. 

“If banks and valuers see water as an asset, why doesn’t the government?”

Rural Business Support chief executive officer Brett Smith said there were more applications being prepared for the loans, with counsellors busy working with dairyfarmers.

He said they were still waiting for feedback on the status of water in the farm business.

“It’s a bit of a grey area at the moment,” he said.

“We haven’t seen where water has been a point where applications are rejected.

“Water is technically worth something and is treated as an asset by the banks.”

He said this was not something that should stop farmers from putting in their applications.

Mr Basham is also urging eligible farmers to stop self-assessing and submit their applications.

“If we have applications in and declined, then we can show there is a weakness in the system,” he said.

“Water is a tradeable asset and is a significant asset in a lot of businesses, and can be used to borrow money from a bank.”