This year's crop, not interest rates, the big concern

Friday, March 07, 2008

GETTING this year's winter crop planted and seeing some decent rain across southern NSW, Victoria and South Australia is a bigger concern to farmers at the moment than this week's interest rate rise, according to NAB Agribusiness general manager, Khan Horne.
While Tuesday's Reserve Bank announcement pushed interest rates to 7.25 per cent – the highest level in 12 years – the farm sector has taken advantage of a considerable suite of tools to take the risk out of rates, especially when there are so many other farming risks to deal with.

Speaking to Rural Press from this week's ABARE Outlook conference, Mr Horne said interest rate risk management was at the "forefront of farmers' minds" and although there were clients who preferred to stick to the variable rate, many more were turning to more secure risk management options.

"We're helping our customers become aware of the various instruments available for fixing rates," Mr Horne said.

About 75 per cent of the NAB rural loan book was now actively under some type of interest rate risk management and up to 50 per cent of the farmers the bank looks after have locked in some longer term rates beyond five years.

Mr Horne said drought recovery, good rains and a good crop were the bigger worry for farmers this year who were sweating on a change of season, especially across southern Australia.

He said farmers wanted to see the traditional March through to June rains, and storages across the nation's key irrigation areas to return to something more resembling average.

"Of course our farmers are also dealing with the challenges around high inputs," Mr Horne said.

"High costs around oil, fertiliser and chemical are a big challenge and a risk farmers will have to face this year."

But he said the light at the end of the tunnel was that commodity prices were so buoyant, and it was still an opportune time for the agricultural sector.

"We haven't seen these sorts of times for sectors like wheat previously," he said.

"The overall global demand for food is positive.

"And if you take it in the context of what's happening in China, there is overall demand for food, for protein, and Australian has always been a dynamic and innovative country than can produce quality food, fibre and beverage.

"And now with good economic growth in some of these non-traditional export markets, things are looking favourable."


SOURCE: Rural Press National News Service, Parliament House Bureau, Canberra and The Land.