Sydney, Australia
October 10, 2007
The Australian Bankers’
Association (ABA) has this week met with State-based farming
organisations to discuss the impact on farmers whose wheat crop
has failed but have hedged the price of their wheat or forward
sold their crops to grain merchants.
The meeting was organised to discuss the current debt levels
associated with the drought and forward grain contracts.
NSW Farmers’ Association, Victorian Farmers’ Federation, South
Australian Farmers’ Federation, AgForce Queensland and Western
Australian Farmers Federation welcomed the commitment by the
members of the ABA to take a long-term perspective of the
agricultural sector.
Farming groups noted that commodity prices are high despite the
Australian dollar and there is no evidence to indicate that land
values will abate into the near future.
Acting Chief Executive of the ABA, Ian Gilbert, said the banking
sector is positive about the long-term future of the
agricultural sector.
“Around 2000 wheat growers representing six per cent of the
current wheat crop were hedged using bank products. Typically
banks are cautious when issuing these types of products to
customers by hedging only a small proportion of the expected
crop. Hedge contracts provided by banks are, in most instances,
for less than 30 per cent of the expected yield. This approach
by banks provides the customers with some protection from crop
failure,” Mr Gilbert said.
“Customers that want to hedge are advised to hedge a small
proportion of their expected yield. This is to help reduce the
risks associated with production.”
Mr Gilbert explained that banks are keen to understand if grain
growers have entered into hedging arrangements with other
financial service providers other than banks or forward sold
their crop to a grain merchant.
ABA member banks have said that they will continue to examine
each customer’s circumstances on a case-by-case basis and the
ABA encourages growers to contact their bank if they have
entered into hedging arrangements with other financial service
providers or grain merchants.
The ABA says the cost of financing these positions will be
important moving forward and has joined farming groups in urging
any grain grower to compare interest rates offered by banks with
other financial service providers and grain merchants.
Banks and farming groups are also urging any grain producer
concerned about their financial position to contact their banks
to discuss their options as soon as possible.
The Victorian Farmers’ Federation is pursuing development of a
register to facilitate the delivery of other growers’ grain
against forward contracts where producers are unable to meet
their contractual obligations. The NSW Farmers’ Association has
also been looking at this issue, while WAFarmers will be
considering the issue at its next Grains Council meeting in
October.
More detail will be provided in the near future. |
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