As a drought takes hold, what is the best plan for Australia’s farms?

100% of NSW is now in drought
100% of NSW is now in drought (NSW DPI)

100% of NSW is now in drought (NSW Department of Primary Industries)

 “The sky, a great flaming oven. Grass withered; water gone; famine-stricken, blear-eyed bullocks, staggering pathetically … Skeletons and bones everywhere.”

So reads a tale of the terrible drought that scorched western Queensland in June 1902.  Earlier that year, Sydneysiders held a day of “humility and prayer” amid mounting concerns about the city’s water supplies. Victoria and Queensland would soon follow suit as the Federation Drought tightened its grip, according to Joelle Gergis’ new book, Sunburnt Country: The History And Future Of Climate Change In Australia.

The wheat crop that year was “all but lost”, sheep numbers halved and cattle would drop by 40 per cent by the end of the drought, which lasted from 1895 to 1902, Gergis writes.

It’s an all too familiar tale. Over a century later, much of Australia is – yet again – in the grip of drought. The current widening dry spell is not yet as severe or widespread as the Federation Drought. But there are ominous portents.

Life on the land has always captured the hearts – not to mention fed the bellies – of all Australians.

Harder hearts

But amid increasing evidence of climate change effects, some harder hearts are beginning to question the near-term viability of many farms, along with the wisdom of the current system of drought assistance.

Australia’s farming industry has already undergone major change. At the time of the Federation Drought, one in three Australians was employed on the land.

Today, the number of people employed in the agriculture, aquiculture and fishing industries stands at closer to 322,000 – down significantly even from 433,000 in 2002. It accounts for just a fraction of Australia’s 11 million strong workforce.

Farms have already disappeared, or merged.

In the mid 1960s, Australia was home to around 200,000 “agricultural estates”, according to the Australian Bureau of Agricultural and Resource Economics (ABARES). Today, that number has shrunk to around 123,000, with 32,000 disappearing since 2006, when a particularly hot summer convinced the Howard government of the need for an emissions trading scheme and a rising tide of community concern about climate change delivered Kevin07 to power.

On election, the Rudd government embarked on a review of drought assistance, commissioning a Productivity Commission review. The Commission – a traditionally conservative economic outfit – concluded the existing system, in which the federal government declared “exceptional circumstances” for particular geographic areas to in order for drought-affected farmers to receive as much as $100,000 in interest payment relief, was inefficient and arbitrary, ultimately dividing farmers by their location on one side of a road or the other.

 The commission concluded such arrangements “do not help farmers improve their self-reliance, preparedness and climate change management”.

The system was ultimately scrapped in 2014, and replaced with one whereby farmers can apply to Centrelink for a welfare-style farm household payment. Federal Agriculture Minister David Littleproud this week announced a review of the farm household payments, amid concern the money is not being claimed by farmers.

A farm deposit management scheme also helps farmers stash away cash in good times to be drawn down in tough times, with balances now totalling more than $6 billion, including $1.8 billion in NSW.

Fraught issue

Farm aid is a fraught issue, that understandably is not a priority for debate when hardships are evident and growing. But as governments assemble relief packages – the NSW government this week announcing an extra half a billion dollars in freight subsidies and other relief – the question of how best to help farmers inevitably arises.

According to economist Saul Eslake: “I think the long-term future of drought assistance can’t be divorced from judgement that ultimately [has] got to be made about the sustainability of agriculture in certain parts of the country in the face of climate change.

”You would think that there are a few areas of western Queensland and western NSW, and maybe north-west Victoria and possibly parts of South Australia, where it may be becoming more likely that the sort of farming practices that have been traditional in those areas for decades just simply aren’t going to be sustainable.

”Just throwing cash at farmers in what seem to be increasingly frequent droughts is ultimately not helping the farmers, as well as being a waste of taxpayer money.”

Eslake points out it is also a way for farmers to minimise tax – another form of assistance. “We formed the view a long time ago that we shouldn’t prop up our textile industry and we took the view more recently that we shouldn’t assist the automobile industry. What’s so special about farmers?”

Eslake has no problem with “assistance to otherwise viable farmers who have been adversely affected by drought”.

Better way?

Linda Botterill, a professor of Australian Public Policy at the University of Canberra, has been researching drought programs for two decades and recognises that “there is no point planning for the next drought when you’re in the middle of a bad one”.

And so, while providing backdated cash subsidies for fodder and water freight – as the NSW government did this week – are bad environmentally and economically because they tend to encourage farmers to keep stock levels too high for too long, now is not a great time to challenge that plan.

“It will make a direct difference to the people who receive the support,” and has the advantage of being “visible and immediate”.

Botterill has long advocated for income contingent loans, rather than grants, that would involve borrowing against the future good years to keep farms in business.

“The government would get the money back so they would be able to give out more in the first place,” she says.

‘Survivial of the fittest’

Farmers themselves say they don’t want handouts.

“We are very intrinsically proud people,” says James Walker, a fifth-generation sheep and cattle farmer from Longreach, Queensland, and current Australian farmer of the year.

He says this drought will be the first real test of the new assistance schemes, which have already created a “survival of the fittest” environment.

“I think that with previous schemes of handouts and subsidies, it was dangerous in that it didn’t create a culture of self sufficiency. There was a dependency it created.”

But in scrapping the old system, Walker says there has not been enough support for farmers to improve their business models, diversify their cash flow and manage their debts.

“The government and all parties are responsible for managing this transition and I don’t think they’ve quite got the framework right yet,” he says. “We really have to support the current farmers transition and support them back into production when it rains so they to hit the ground running.”

A combination of pride and the paperwork involved have prevented farmers taking up the new dole-style household allowance, he says. “We must remember these farmers work from sun up to sun down.”

A farmer for 22 years, Walker says he has had to totally destock four times during droughts. “You basically have to be very responsive, understand your production system and finances and be agile. I learnt that the hard way.”

Walker has opened an outback yacht club, which attracts 4000 visitors a year and installed a $29 million solar farm over 100 acres to generate extra income in tough times.

“Farmers are quite resilient and add the fabric that is the toughness to the Australian culture,” he says. But “from time to time they will need to share the load and are much more interested in a hand up than a handout”, he says.

How bad will this dry get?

The role of banks in supporting the farming industry is also under the spotlight of the banking royal commission, even though it only heard six days of evidence from farmers angry with their treatment.

While it remains to be seen how the big four banks respond to the current dry times, it is understood they are increasingly looking to “stress test” their loan books for climate change impacts.

A squeeze from banks could exacerbate pain in hard-hit rural areas.

Nicky Kirkby, whose family has farmed at Bellata near Moree for a century, says “most [farm] mortgages are based on land values,” which means banks can lift interest rates or call in loans if there is a poor auction result in the neighbour.

“One false move and the whole deck of cards crumbles,” she says.

Given those risks, some farmers realise that foreign buyers of farmland are important for shoring up land prices even if their purchases are “a double-edged sword” unpopular in many parts, she says.

Risks mount

Climate change, which has already added a degree of extra warming in the past century, looks likely to accelerate, exacerbating challenges down on the farm over the longer term, Gergis – a climate researcher at Melbourne University – and other scientists say.

“It’s never been as dry as this,” says Kirkby. “Generations previously would have walked off the land”.

While Kirkby’s own farm managed a cotton crop in March after a timely freak cloud burst over her 9000-hectare property, her neighbours missed out. Still, her family didn’t plant the usual winter wheat. “We would need a considerable amount of rain to even consider planting a summer crop,” she says.

The scale of the Big Dry was updated this week by the Bureau of Meteorology, which said rainfall deficiencies have increased in extent and severity “for almost all of NSW, inland southern Queensland, northern Victoria” and other regions in South Australia and Western Australia.

Last month was Australia’s driest July since 2002, with rainfall half the average. For the Murray-Darling Basin, the country’s food bowl, rainfall was about a third the norm. NSW had just over a fifth and Queensland 30 per cent the normal rain. Only Tasmania collected above-average rain.

Ominously, it was also the nation’s second-warmest July on record for daytime temperatures, including record heat in Sydney and Brisbane.

NSW, which has had its warmest January-July, posted its fourth-warmest July alone, as did Queensland. Even Victoria, buffeted by more cold fronts, posted its sixth-warmest July.

Soil moisture woes

In NSW, soil moisture levels, critical for crops and pasture, have been this low over so large an area only twice before – in 1902 and 1965, says Karl Braganza, the bureau’s head of climate monitoring.

The bureau’s August-October outlook points to below-average rainfall for most of eastern Australia and warmer-than-normal temperatures as unfavourable climate influences from the Indian Ocean tighten the atmospheric tap that normally streams moisture across the continent at this time of year.

With such a combination of existing dry conditions and such forecasts, “you see more slow-moving high-pressure systems in late spring and summer”, Braganza says.

And the impact of resulting heatwaves is typically multiplied, knocking as much as 10 per cent off the yield of cereal crops – assuming farmers have enough moisture and funds to plant in the first place, he says.

If that prognosis is a worry, the bureau is also rating an El Nino developing in the Pacific as a 50-50 chance by late spring. Such an event typically results in more of the same dreaded mix of lower rainfall and hotter-than-normal temperatures.

Rethinking farming

Policy director at NSW Farmers Kathy Rankin says that while people speak of a creeping drought, this year’s descended more quickly than many on the land were expecting.

Unlike some previous droughts, though, high commodity prices have helped provide some buffer for those with product to sell. Fat lambs were recently selling for a record $300 at Wagga Wagga, she says.

Many farmers have been taking steps to prepare for the drought, such as destocking in advance and choosing wheat varieties that are more resilient to dryness, Rankin says.

Still, some “difficult farm management decisions” lie ahead as farmers weigh up gambling on planting a summer crop – with the risk of little return for a heavy expense – or forking out to keep core breeding stock for the eventual recovery when the rains return.

“There is potential for all farmers to rethink farming practices,” she says, adding it will be important that available policies provide appropriate support.

‘My Country’ revisited

While most Australians are familiar with Dorothea Mackellar’s 1908 poem “My Country”, and its land of “droughts and flooding rains”, many don’t appreciate that Australia has warmed about one degree since then.

“Droughts are getting hotter because the planet is warming,” says Gergis, who spent a decade studying accounts and records of the country’s weather. “It’s not just natural variability that we are dealing with any more.”

In her book she also cites the CSIRO and the bureau’s Climate Change in Australia, that projects average temperature increases of about 4 degrees compared with the 1986-2005 baseline for much of eastern Australia by 2090 if global carbon emissions continue unabated. For Victoria, Tasmania and south-western WA, the temperate rise will be closer to 3.5 degrees.

It is “the perfect time to be talking about the vulnerability to increased drought in the future,” Gergis says.

At just over $60 billion in annual output, farming makes up just 3 per cent of the modern Australian economy, which is increasingly dominated by services and mining. Still, the drought will be felt across the economy, as exports suffer and spending dries up in rural and regional communities.

Once again, a nation holds its breath and waits – and perhaps prays – for the rain to come to see how bad this one will be.

 

Original article published in The Sydney Morning Herald, 3 August 2018 7:53pm (link)

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