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House of Assembly - Fifty-First Parliament, Second Session (51-2)
2007-11-22 Daily Xml
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BARLEY CONTRACTS

Mr VENNING (Schubert) (15:29): I rise today to highlight a problem of barley contract washouts. This is a new but very serious problem, and I think most members would be aware of it. I think it is appropriate that we reflect on the problem now, considering parliament's actions and what can be done and because the harvest is now over half finished. I declare again that I am a barley grower, or at least my family is. I refer to the shocking situation where farmers, who are now on a deregulated grain market, particularly barley at this time, have been savagely caught after forward selling their barley—contracted to traders—and who, in many cases, are not able to fill those contracts because of drought. But worse—much worse—they now have to buy barley at a hugely inflated price to 'wash out' these contracts and, even worse than that, many banks will not finance these wash outs.

Most farmers presold their grain in June/July when the crops looked quite good and the weather forecaster was saying that there would be reasonable follow-up rains in spring. The advice then was, 'If you can get $200 a tonne for feed barley, forward sell.' They should have also been told to ensure that they only commit a quarter or one-third of an average crop just in case. Many were not told, reminded, or forgot about this. It has not rained at all in much of South Australia since and the price of barley has soared to $460 per tonne, and panic has set in. Farmers were told to bale out as quickly as they could and wash out their contracts, often with an additional $40 per tonne penalty (see the fine print). In other words, you had to buy barley for $460 a tonne to fill your contract for $200 a tonne. You do not have to be Einstein to work out the dilemma.

When the government decided to deregulate the barley industry, the Minister for Agriculture, Food and Fisheries (Hon. Rory McEwen) assured parliament that farmers would be provided with the necessary information and education to trade in an unregulated market without the single desk. That is why I am making this speech now. At the time of the second reading of the bill, minister McEwen said:

To facilitate the transition to an open market, the government will underwrite an education and training program for barley growers in South Australia. In addition to explaining the changes to barley marketing and introducing growers to price and other risk management tools, the program may include Victorian barley growers presenting 'case studies' of Victoria's transition to an open barley market.

I stand here now and ask the minister and the government what education and training programs were undertaken. I do not know of any. I know some meetings were called but they did not happen. I could not ask the minister during question time but I ask him now via this grieve: what was done—and I ask that in a fair manner?

What we see now is a train wreck. Many farmers will go down hundreds of thousands of dollars. I know of eight who owe between $500,000 to $1 million. A small farmer who first alerted me to the problem six weeks ago, who planted 500 acres of barley and who sold 500 tonne, will go down $130,000, plus penalties. That is staggering. He is a first-time seller. He received poor advice. Another large farmer could lose $1 million to $1.2 million. Every country MP in this house will know of farming families and constituents who are severely affected. Some will lose their farms over what we did. It is a fact, and I will repeat: some will lose—

Mr Pederick: What they did.

Mr VENNING: What they did, in that case. Obviously many of these unfortunate people will fail and default on their contracts, but what then does the trader do who, in most cases, has on sold that grain and has committed to that. They, too, will be in trouble. As I said, if we had to deregulate, we should not have been so hasty. We should have had a moratorium of at least a year and, in that time, had meetings to educate farmers about the pitfalls and dangers inherent in operating in an unprotected environment or, at the very minimum, come through with the education and training which the government avowed to underwrite.

In hindsight, it would have been an excellent year to reveal to all players what can happen in an extreme situation, with the vagaries of drought and market pressures. I very much regret that the house has done what it has done. I must declare again that I am a barley grower and my family did some forward selling but, by the grace of God, my family is not greatly affected and will deliver on our contracts.

That does not stop me hurting for my industry colleagues and farming friends, especially when much of it could have been avoided. Yes, in full, open deregulated systems the buyer and seller have to beware. It is a risk, a punt, a gamble on the market and must be managed and safeguarded by hedging, etc., and done with all the downsides in mind. We have gone from many years of having a protected market scheme, and many farmers are poorly equipped to manage the new scenarios. We needed to put in a longer transition period. If the government can assist, it should.

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