Australia offers drought ravaged farmers $688.10m in cheap loans

Australia will offer farmers hurt by drought up to A$1 billion ($688.10 million) in cheap loans, Prime Minister Scott Morrison said on Thursday, as the government seeks to curb rising discontent from rural voters.

Australia is among the world’s top 10 exporters of the grain, the largest part of the country’s agricultural sector that typically contributes about 2% to GDP.

With lower production, Australia - typically one of the world’s largest exporters - is also likely to lose greater market share in lucrative markets such as Indonesia and South Korea at a time of falling prices.

In addition to offering cheap loans, Morrison said the government would also sell 100 billion litres (26.4 billon gallons) of water at discounted rates to farmers for growing up to 120,000 tonnes of fodder.

Farmers across Australia’s east coast have been battling drought conditions for more than three years, wilting agricultural production and leaving some towns on the brink of running out of drinking water supplies.

With growing anger amongst the conservative government’s traditional voter base, Morrison offered new financial aid, including temporary interest free loans, designed to allow farmers to stave-off bankruptcy. “What this is doing is supporting farmers and graziers who know they have a future in the sector, and are committed to getting to the other side of this drought, and knowing that better days are on the other side,” Morrison told reporters in Canberra.

“This gives them the massive breathing space.”

Any small business deemed to be dependant on agriculture will be eligible for a concessional loans of up to A$500,000, payable over 10 years.

To ease the financial burden, the government said there will be no interest payable over the first two years of the loan, while businesses will then pay only interest on the loan between years three to five. Principal and interest payments will then be due from year six.

The industry body representing Australia’s farm industry, the National Farmers Federation said the aid was especially needed as the drought shows little sign of abating.

Australia’s Bureau of Meteorology expects just a 40% chance that the country’s east coast will record average rainfall between Dec.1 and Feb.28. The financial aid package is being announced just weeks before the grain harvest, which typically begins in December.

But with almost no rain in recent months across New South Wales and Queensland, farmers do not expect to harvest any meaningful supplies, curtailing rural exports.

INTL FCStone on Wednesday said its poll of an unspecified number of clients pegged Australian wheat production at 15.54 million tonnes, 19.1% lower than Australia’s official estimate of 19.2 million tonnes.

The heaviest rains in years have fallen across parts of Australia’s east coast on Monday, bringing relief to some struggling livestock farmers, although the showers are not likely to break a drought that has crippled the country’s grains sector.

Australia’s Bureau of Meteorology said some parts of the state of New South Wales received nearly 100 mm (4 inches) of rain over Sunday. The rainfall was particularly welcome in towns such as Bourke, 800 km (500 miles) northwest of Sydney, where people had to start drinking groundwater in April.

Groundwater, also called bore water, is sometimes contaminated by minerals or chemicals as it seeps into aquifers below the earth’s surface.

“This much-needed rain will certainly bring some much-needed relief and smiles across the country,” said Oliver Gordon, a resident of Bourke.

One overjoyed local was Gordon’s father, Andrew who can be seen in videos posted on social media wading through waterlogged fields and rolling in water.

More rains will be needed, though, to break a drought that has gripped a swathe of Australia’s southeast for three years, turning pastures brown and forcing ranchers to buy expensive feed grains to keep their herds alive.

Analysts said the rains may have come too late to save the grain harvest, set to begin within weeks, although the moisture will help cattle and other livestock graziers.

Wheat production is expected to fall well below 20 million tonnes, more than 22% below the 10-year average.

With many agricultural producers battling to stave off bankruptcy, Australia’s conservative government has been forced to offer grants and cheap loans to farmers.

Australia’s Deputy Prime Minister Michael McCormack warned that the impact of the drought would likely continue for years.

Reuters