"Perfect storm" traps farmers

Many of the State's farm businesses remain in dire financial straits, and according to Rural Financial Counselling Service (RFCS) executive officer Chris Wheatcroft the problem isn't going away.

A perfect storm of financial and seasonal conditions has created a situation where farmers are trapped, unable to sell their land and without adequate finance to continue cropping this season.

RFCS said that in the past four years there had been a jump in farmers accessing their services - nearly 700 farm businesses sought help during that time.

Although some of the increase can be explained by the RFCS offering extended services and becoming better known, Mr Wheatcroft said it still pointed to a dramatic shift in the health of the industry.

Mr Wheatcroft said it was not the bottom one or 2 per cent of operators that were finding things tough, but across the board, including growers with good farming practices in traditionally safe areas.

"Overall as an industry there are a significant number of people experiencing difficulty who don't normally experience it," he said.

"Some of the decisions they've made were good decisions except they were followed by a couple of years of losses.

"Last year was the third one that actually ended up without profit because of the downgrading of grain and the low price.

"That combination in the current environment when banks are risk adverse is problematic."

The Planfarm Bankwest 2010-2011 benchmarking study of WA's farm businesses indicates farm debt is continuing to soar as equity plummets.

In 2000, the average WA farm had less than $200 of debt per effective hectare and equity was above 80 per cent.

Eleven years later and the data show farms buckling under farm debt levels triple that of 2000 with equity levels just over 70 per cent.

And for growers looking for a way out of debt, the traditional route of selling off assets is becoming increasingly difficult.

"One of the fallback positions was they could sell off some land or they could adjust where they farmed - sell the one they've got and buy another," Mr Wheatcroft said.

"But that can't happen - there are very few sales and that locks people in.

"Therefore, they had to put more crop in because the only way they could keep the debt in check was to crop more. But that turned out to be a disaster.

"While normally people would sort out their own problems, at the moment there is a backlog of people who can't get out and are caught in a very difficult, stressful situation."

The situation could call for a reduction in land prices but any correction may simply make things worse for some growers.

"There are a number of farmers who don't want to be seen as causing a dramatic fall in the price of land," Mr Wheatcroft said.

"There's a lack of confidence as to what the real price of land is but it's hard to see what the Government can actually do about it because they can't underpin the price of the land."

Mr Wheatcroft believes the current financial situation points to the industry restructuring and he said the area in which the Government could offer the most help was assisting growers with restructuring.

But while that was the role organisations like the RFCS played, its Federal Government funding had been cut.

About $160,000 in additional funding came from Federal coffers as part of a drought response.

The extra funding finished last year and while the RFCS's contract was renewed for four years, the funding was not.

That takes the number of financial counsellors back to five. The service estimates it needs at least 10 counsellors, or an extra $600,000, to cope with demand.

"The State Government put in $200,000 and then another $200,000 in the last 18 months but that ran out in April," Mr Wheatcroft said.

"RFCS is under-resourced and it's a challenge to deliver a worthwhile service.

"To be effective you need considerable face-to-face time with clients and without adequate funding that effectiveness is diminished."

Mr Wheatcroft said the service was in funding discussions with State and Federal governments.