As risk of drought rises, Australian farmers struggle to invest

Mon Aug 18, 2014 5:09pm EDT
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By Colin Packham

SYDNEY (Reuters) - When a scorching drought struck eastern Australia in 2006, cattle farmers Robyn and Paul Kendal had to slaughter nearly all their livestock and spend around a year of their normal turnover on feed to keep the remainder alive.

With a recurrence of El Nino, the weather pattern behind the drought, looming and dry conditions already affecting an area larger than South Africa, another major drought could be one struggle too many for farmers such as the Kendals.

"In 2006, we saw the lowest amount of rains here since records began...and we still haven't recovered from that even today," said Robyn Kendal, whose 3,000-acre (1,215 hectares) cattle farm is about 500 km (300 miles) southwest of Sydney.

Already one of the world's top agricultural producers, Australia has ambitions of becoming a "food bowl" to Asia as it tries to diversify its economy to counter the waning of a decade-long mining boom that brought the country riches.

That goal is threatened by its harsh climate - private insurance to protect against drought is generally too expensive for farmers, undermining their capacity to invest to boost output as they must if Australia is to feed more of Asia's fast-growing middle class.

Drought is a traditional foe in Australia, the world's third-biggest beef exporter and a big producer of crops such as wheat and sugar. But an inability to contain the risk means less money available to channel into new equipment or technology for farmers already saddled with a record A$64 billion ($59 billion) of debt.

"In Queensland, farmers' interest payments as a proportion of their receipts is twice what it is elsewhere in the country," said Peter Gooday, head of farm analysis at the Australian Department of Agriculture.

"If you are struggling to meet your interest payments then that is your first thought rather than investing."   Continued...