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Peak farming groups contact Aus Bankers Association on $1bn crop crisis; lawyers to advise farmers at meeting on 5 Oct

Posted by gmarkets on 2 October, 2007

At least four peak farming associations in the nation’s main grain-growing states have jointly written to the Australian Bankers’ Association to try to head off a looming crisis that could force more farmers to the wall, wrote Siobhain Ryan in The Australian (27/9/2007, p.4).

Transfer of wealth, to banks: West Australian Farmers Federation grains president Derek Clausen said: “I wouldn’t be at all surprised if the size of the problem didn’t get towards $750 million to $1 billion in wealth that’s just going to be transferred from the growers to the financial institutions. I think the problem is widespread. I know of two growers in Western Australia that have written cheques totalling $1.4 million between them to cover their exposure.” Farmers who, for example, took out a contract early in the year to supply 1,000 tonnes of wheat on harvest at $220 a tonne were now seeing their crops devastated by drought while prices have nearly doubled on the world market. Some would be forced to buy wheat at higher prices to make up their harvest shortfalls and close out their contracts.

Acts of God: The Victorian Farmers Federation invited legal firms to advise on options for farmers at a special meeting on October 5. VFF grains vice-president Andrew Weidemann said they were likely to discuss the quality of advice contract-sellers gave to farmers, and whether get-out clauses such as Act of God provisions applied. “I guess that’s really where any form of legal action may come from, if at all,” Weidemann said. The number of growers with contracts but without the crop to fill them was unknown, he said. He estimated that as many as 80 per cent in his area could have taken out forward contracts.

Meetings to be held: Several of the main grain marketers who sold the forward contracts, including AWB, have been invited to front affected growers in the South Australian town of Pinnaroo on 28 September. Another meeting was likely on the Eyre Peninsula next week. As of late yesterday, the Australian Bankers’ Association had not replied to requests for data on the number of growers caught with the contracts and how deeply in trouble they were, the farmers’ groups said.

The Australian, 27/9/2007, p. 4

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