GRDC's dealing with the dry forums brings together keynote speakers one of
which is Gary Littlejohn's Garry has a strong background in banking
and is currently working as an agronomist.
Well as an agronomist for 15 odd years
and then went across to banking I've been in banking for
12 years and I've just got out of that 12 months ago back into agronomy again.
So I think they thought that I could come up with a pretty candid view of the banking
setup and the system and tell it pretty straight how it is so I think that's the
value that I bring to the table probably. So the Royal Commission's had a
reasonable impact already on the farming sector. They've introduced a lot of new
rules around certainly not allowed to charge excess interest on areas that are
drought declared and they've made a four-eyes policy internally within the
banks to make sure that somebody's over viewing accounts that they deem to be
stressed by drought so they're placing a lot more diligence around those cause
than they used to but what the result of that is been that it's tightened up
credit as well so it's made money harder to get for all
those same reasons that they're having to do more due diligence than they've
ever done previously and they've also had to introduce a layer of compliance
that's never been an issue before but it's really increase the workload of the
banking sector. Yeah so certainly we would be suggesting or recommending that
the farmers are keeping close contact with their banks because this whole
compliance layer has slowed the process down of introducing more funds working
capital into the farms so it's dragged it out where it used to be a you know
two to five day turnaround to put extra capital out the door for working process
now it's coming up to probably four weeks so you really need to be proactive
around managing that process and making sure that you're ahead of the game and
more prepared than you used to be previously. So what I mean by being
proactive around being prepared to go to your bank is that having all your
budgets available up to date a certain liability statements all the things that
the banks need to assess to put you in a position to or to determine whether
you're going to get more funding or not I guess and so you certainly need to be
going back and having your BAS statements up to date and talking to
your accountant, getting all the information up to date that you need to
have because the review process is certainly forefront of bank's ability to
operate on your behalf for carry on funding yeah so if you've got two
or cash flow budgets worked out you know how much you need for how long certainly
that will put you in a better position with the banks and they have an
understanding then of what to what your budget looks like because one of the
Royal Commission findings certainly was that in the past they've been allowed to
prepare budgets on the client's behalf and they've said that's an absolute
no-no going forward so that's the budget has to be prepared by the client because
there was conjecture around who was responsible for that budget if the bank
prepared it and it didn't come to fruition whose responsibility was at the
say where did that variation come from? Now they're saying well if the borrower has
prepared it then there's no arguement around and and certainly in a drought
their understanding around variations between actuals and budgets there's
always going to be fluctuations depending on what the seasonal outcome
comes to but you know if there's a cropping opportunity there certainly for
some summer crop still it's not too late people need to be well in advance of
having that funding available. Yeah so the key in a drought period for the
growers certainly is maintaining that communication with their bank around
making sure that they've got the avenue open to make sure they're going to get
the ongoing funding assistance that they may or may not need. So it's really
important that they're informing the bank ahead of the line when they're
going to need more money or what their plans are so lay a plan on the table if
you don't have a plan the bank really is not going to be prepared to support
somebody if they just come in and ask for ongoing funding without having a
strategy there that they can lay on the table. Really important that you can say
I've planned to plant you know so many hectares of crop this summer I've got X
amount of soil moisture and so I've got a reasonable likelihood of success there
without all that additional information it's really difficult for the banks to
assess this it's likely to be a successful or a risky project so really
important that they're aware of those sort of things and then following onto
that then they've also got to be aware that some of the inputs that they may or
may not require are going to be difficult to get hold of this year so
certainly certain fertiliser. Fertiliser is freely available but it's at a
cheap price at the moment because there's no demand for it so the
companies that supply fertiliser is certainly a position to negotiate.
But seed is very tight so they're extracting a premium to the market but
on the other side of that I think making sure that you've got seed in your
position where you can plant is key so make sure that you're talking to your
supplier around availability and putting your hand on some and you don't
necessarily have to buy it upfront but I think if you're getting it making it
aware of how much you're likely to need certainly there's a lot of seed that's
been stored in on-farm in the past that may or may not have a good germ test
important that they go back and test that before they plan to use it because
it might not be up to scratch and it may mean that you need to step into some of
this expensive so that is going around but it's still going to give you a
better outcome than plenteous a crop that's only got a 30% germination rate.
So really really important that you're aware of those type of things but the
costing issue for farmers I think trying to look down the line and where you can
save money I think making sure that you get everything right your preparations
right, your fallows are clean, you've trying to preserve as much moisture as
you can and it's difficult to maintain any ground cover I know but moisture is
going to be the key to getting a successful outcome on the next crop it's
going to be very tight to get it through. So preserve what you can and make sure that
you're chasing moisture when you're planting you've got you're using the
right gear and it may mean that you need to go to a neighbor who's got some
moisture seeking gear or better press wheels and things so that you're getting
a better germination. It's certainly that can be the difference between success
and failure in a marginal season. I guess there's a lot of conjecture in the
marketplace at the moment around is there going to be foreclosures where -
where do people stand. I think it's a case-by-case basis but certainly you
need to be looking at it and talking to your bank and asking the hard questions
from those guys and saying well how do you view me and what to highly geared do I
need to be do considering capital debt repayment or selling assets or where do
I where do I stand in that regard and I think they'll be pretty honest we do
they'll give you honest feedback in terms of what they see is the strategy
because some people, it's going to be very slow lift out of this drought while
commodity prices are strong that certainly in our favor and you know if
we can achieve some yields there's some good gains to be made there on the back of those
strong grain prices but probably there's a reason to there to go to a risk a low
risk enterprise as well. Don't be growing a crop that you're not
comfortable with making sure that you've growing a crop that you know you can get
a result on and it's suitable for the season and the moisture conditions that
you have available in the paddock all those things will paint you in a better
light from a bank perspective in terms of saying why we
should back this guy long term. No-one wants be in a position where they're
getting tapped on the shoulder and said you know we think you need to consider
selling or I think that's that's the last resort for any farmers
and it certainly there's a lot of aging farmers out there who are contemplating
that anyway irrespective of their debt position and you know all those things
say that it is probably going to be a lot of places hit the market when this drought
stops irrespective of financial stress so is it the right time to get in or out
I don't know there's certain we're going to see a plateauing out of values of
properties I think and that may carry on for some time based on I think there's a
lot of people wondering your system you're normally going to see more dry
periods going forward so you need to be prepared for that and making sure that
you're aware that you can cope with longer extended periods of dry, making
sure you're maintaining adequate ground cover certainly it's a key to making
sure you're not getting this high evaporation losses, soil losses from
wind erosion that we're certainly experiencing at the moment. All those
things you can do long-term to look at maybe even mixing up the commodity
enterprise as well. Making sure you're using multiple crops where available
more water use efficient crops all those things that you can do to be proactive
around you know moving forward in the best fashion that you can. Yeah also very
important for growers to make sure that they have got that seed and fertiliser
availability and paid for ready to go so that when we get a break
they're in a position to move forward it's you know don't let an opportunity
pass if we get a good break and everybody's in a mad rush to get it it's
it's going to be hard to get hold off for sure.