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Managing collateral damage

Managing collateral damage
FARMERS are where we are in Australia today because of the choices we’ve made. Business decisions that justify taking on debt given the geography, historical data and terms of trade for areas concerned are ‘ballsy’ to say the least.

Blaming banks for rural debt is like blaming McDonalds for obesity

If you want to enjoy the fruits of financial leverage, you have to be willing to pay the price. If the price you are prepared to pay doesn’t include your property, don’t write it in as collateral into a commercial contract with a bank. For some, this will be telling you how to suck eggs - for others, this may be a painful truth you are learning the hard way.

“A tough conversation is needed, not more emotive hype”

Last week seemed a week of wins for agriculture, farm businesses drowning in debt, the federal government and some vet from Toowoomba.

Barnaby Joyce put his foot down and shook a fist at the big four banks. One bowed and Australians saw the government that many love to hate finally get a run on the board. It was a win for the “shocked, humiliated and penniless farmers” that now live like “hunted refugees”. These were the words of Queensland veterinarian, Dr David Pascoe. You should read some of his eloquent tales of misfortune, spammed across Australian social media. With such fulsome narratives to hand, who would read novels?

As a result of either the recent rural debt summit, a cranky press release from Bob Katter, a well-orchestrated Facebook campaign backed by a radio personality or a calculated business management decision (you be the judge), ANZ announced it would freeze foreclosures on drought-affected farmers and also supply a few other forms of relief. What a noble deed... or was it? I’d like to know if the costs incurred by this new strategy from the ANZ bank will be written off under ‘bad debt expense’ or ‘marketing’ in their financial statements - my guess is the latter.

“Deferring foreclosures until next Christmas will do very little to help the sector”

As for Dr Pascoe, with the help of his mate Alan Jones he has gained a large following on social media, composed largely it seems of digital rubbernecks and melodramatic magpies obsessed by shiny things like anti-commercialism. Anyone can start a stampede, but what really counts is what you do with that energy, and to date I’ve not seen any contribution made by those enjoying the publicity wagon that addresses the real threat.

That's the issue of around $66 billion debt tied to the ankles of rural Australia. A tough conversation is needed, not more emotive hype.

It’s no surprise we’re in drought, that’s an inevitable part of farming in Australia. Nigel Austin, South Australian award-winning rural journalist, said in his 1986 book Kings Of The Cattle Country: “They were men hardened by deprivation in the driest and least inviting continent on earth; men second to none in survival skills, superb stockman and tending more towards fatalism than bravado”. These men ran cattle in the north over 130 years ago and struggled in the very areas we see struggle today. This is why those businessmen, like James Tyson and Sidney Kidman, bought properties elsewhere to drought-proof their business.

Banks foreclosing on farm businesses or any business is also not a surprise. They are businesses, not charities, and owe much to their shareholders who have an interest in their returns. Simple stuff. Blaming banks for rural debt is like blaming McDonalds for obesity. They don’t force you to eat their food.

“Unsurprisingly the banks will want to clear that bad debt and minimise their risk”

Laura Eadie, a research director for the Centre for Policy Development, stated in a Submission to the 2014 Financial System Inquiry: “Agricultural lending has outpaced production twofold since 2001. This means farm land prices have inflated beyond what farm economics justify – with the risk of widespread default in times of drought. There is an estimated $5 billion of bad debt held by major commercial banks”.

Unsurprisingly the banks will want to clear that bad debt and minimise their risk. Much of the media and flagbearers like Dr Pascoe would have you believe that these farmers are going about their daily business when the bank rocks up, demands their keys and gives them a week to pack. Foreclosures usually take up to two years, following a process of considered mediation and exploration of options between the business owners and the bank. It’s a last resort, the last decision, the last transaction, but many would have you believe its the only one. If you read an annual report from one of the big four, they detail their focus around “strategy to maintain well-diversified credit portfolios focused on achieving an acceptable risk-return balance.” It’s stated there for you, clear as day.

“Unfortunately many farm businesses set and forget ... There’s not enough fat in the system for that”

I asked James Walker from Agrihive for his thoughts on debt. James is also manning a property that’s been 23 months without rain in Longreach, Qld.

“Unfortunately many farm businesses set and forget. Unlike their bank, they set up a financial product and rarely review or revisit," he said.

"The interest starts to compound and the market may drift away from the initial rate which jeopardises the buoyancy of their enterprise. There’s not enough fat in the system for that.”

And that’s before we consider our dismal terms of trade and rainfall variability. Throw in a ban on live export and we have the beginnings of a really big problem, made worse by the fact too many farm businesses have been borrowing against the hope of future growth of the assets and extending their risk beyond their potential to repay.

James went on to say that the key to solving the rural debt problem is to empower producers with the best possible knowledge on their individual situation so they can draw a line in the sand on what’s best for their business.

“If you’re not equipping the borrowers with the right tools to make decisions, then even macro decisions that attack issues like policy or bank function leave these farm businesses open to being consumed by the market,” he said.

Ultimately the farm business manager has to make the decision on what’s best for them, their dependants, the property and business. James argues rallying for macro changes is critical but must be underpinned by enabling micro performance. “The farmer will defend the business interests at the lending end and not the repayment end if we can enable change in this space," he said.

Deferring foreclosures until next Christmas will do very little to help the sector, as there need to be some big changes around weather, markets, business management and property values to make change enough to keep bank shareholders happy. And if all those stars align, it will take the better part of a decade.

What are your thoughts?

Author: Sam Trethewey
Source: Queensland Country Life

 David Pascoe's response to Sam Trethewey's atricle.

THINGS THAT AMUSE US: THE WONDERFUL WORLD OF SAM, AND SAM, AND SAM, AND SAM AND SAM AND SAM....

Sam Trethewey is a Tasmanian – but not just any Tasmanian, you understand. He has movie star looks and some suggest that he is the most handsome male to come out of Tassie since Errol Flynn went to Hollywood.

Sam has settled in Victoria, taken to farming with a flourish and become a multi-media star as a resident blogger and columnist for Fairfax Media and its rural stable of Stock and Land, The Land and The Queensland Country Life.

Admittedly, Sam is handsome in a Mark Darcy kind of way - who he says is one of his favourite movie characters – or maybe he’s more like Brad Pitt in Legends of the Fall, which he also says is another of his favourite movie characters.

He was clearly born with a flair for the media – we’ve included photos of Sam as a toddler wearing what looks to be exactly the same Akubra hat that he is still wearing today, which proves that his head hasn’t swelled.

If this isn’t enough, there’s also a memorable Bachelor of the Week interview from High Heels and Hangovers where Sam coyly discusses his choice in underpants (“boy shorts please”) owning a reindeer jumper just like Mark Darcy and how he likes to keep Lucas paw paw ointment on his nightstand (to keep his hands soft, we assume).

Because we have so many female readers, we have also generously included a video (below) for your entertainment of Sam competing as a Finalist in the 2013 Mystery Creek NZ Rural Bachelor of the Year, where he is quizzed about his intimate conquests of women. (after the girls in the office showed it to me I decided I’d much rather be a boring old vet)

While we wish Sam a dazzling career in the media and hope he will be famous one day, we would like to offer Sam a little sage advice without dampening his considerable ego.

Sam has launched an attack on me in his column this week which is designed to give me both a firm spanking and settle down any political unrest for his bosses at Fairfax Media - and his best friends in the Federal Government.

Then for good measure Sam also launched his twitter account in my direction:

…”Finger pointing & emotive hype is great clickbait, but far from nurturing the real change needed https://www.theland.com.au/blogs/get-muddy/managing-collateral-damage/2719628.aspx?storypage=0 … @DrDPascoe @AgriHive..”

Frankly, Sam, I’m thrilled to be called Clickbait, especially since- as an Equine Reproduction Specialist - I’m mostly covered in mud, blood and flies.

Sam’s attack in on me in his column was pretty ham-fisted, to say the least.

You see, he gave it all away with a the first few quotes: ..”Barnaby Joyce put his foot down and shook a fist at the big four banks. One bowed and Australians saw the government that many love to hate finally get a run on the board…”

That’s’ really good stuff, Sam: but let’s examine it again – and slowly: “ Barnaby put his foot down and shook a fist at the banks”… and …”the government many love to hate finally got a run on the board…

That’s exactly what they wanted you to say, didn't they?.

That might have worked back in the days before social media, when the Stock and Land and The Land and the Queensland Country Life was the big barbed wire fence that kept all the naughty human cattle well sedated and in their place.

These days, opinions are no longer shaped by what people are told to think by a once a week rural newspaper. Opinions – like news – come and go in an instant. And the social media is now revolutionizing political elections all around the world. Newspaper sales are declining simply because newspaper opinions are no longer considered relevant.

But it seems that Sam still wasn’t finished with fixing things up for the Government: what he needed to do was really bring “some Queensland vet” - as he likes to describe me - right down to size.

He refers to my description of farmers as “shocked, humiliated and penniless farmers” that now live like “hunted refugees”.

…“you should read some of his eloquent tales of misfortune, spammed across Australian social media. With such fulsome narratives to hand, who would read novels?”, he wrote.

The really sad part about this is that Sam clearly lacks any human decency or compassion as a human being. I would challenge anyone who walked into that tragic meeting at Winton not to be completely broken by what they saw and heard. Elderly men thrown off their stations. Woman after woman – wives, mothers, grandmothers – standing up to bravely tell the stories about being forced off their stations and their family homes.

What Sam doesn’t want to talk about was the fact that what has happened to these farmers wasn’t their fault, but rather, the consequence of a perfect storm: the collapse of the live boat trade followed by an record old man drought. They were human beings. They were Australians. They were our own people – and they desperately needed help.

In fact, Sam displays a brand of arrogance that is nothing short of extraordinary.

Because life has a way of teaching us about showing love and compassion to others, about walking a mile in someone else’s shoes. That’s one of the things you learn the longer you are on this planet.

But it seems that Sam wasn’t finished yet. “As for Dr Pascoe, with the help of his mate Alan Jones he has gained a large following on social media, composed largely it seems of digital rubbernecks and melodramatic magpies obsessed by shiny things like anti-commercialism. Anyone can start a stampede, but what really counts is what you do with that energy, and to date I’ve not seen any contribution made by those enjoying the publicity wagon that addresses the real threat.

“That's the issue of around $66 billion debt tied to the ankles of rural Australia. A tough conversation is needed, not more emotive hype,” he writes.

You know, I frankly don’t give a damn what Sam thinks of either me or my letter, but I do care that he has run off with the megaphone of his own opinion without checking any of the facts.

The truth is there are a large number of independent thinkers now coming together to examine solutions for Australian agricultural and ways to take it forward in the 21 Century on a very solid footing.

Changes will be made. And some of those changes may well challenge the Governments of the day – which is what a healthy democracy was meant to be all about. No party has the right to hold power if it does not listen to the will of the people. And right now, all of our governments are listening to the will of the banks and the corporate and mining bosses – and that’s the reason this nation is so angry – and so deeply disillusioned.

It is also disconcerting that a young man with such a prominent position in the national rural media could reveal himself as being so , so poorly informed – and so cleverly manipulated.

We have noted that Sam’s column was posted on the internet around 3.00 am on 16 December.

He later tweeted four hours later on or around 7.00 am, 16 December:

Sam Trethewey

We need a tough conversation on #AusAg debt, just because some may not like it, doesn't mean it shouldn't be had. https://t.co/kg2T3QPgwv
An hour ago (8.54 AM 16)

So what’s this, Sam? “We need a tough conversation on Australian debt”? And “just because some may not like it doesn’t mean it shouldn’t be had..”

Who are “they” Sam? Who “may not like it?” Do you mean all the politicians who are now controlling you – or just some of them?

And did you suddenly wake up this morning with a fit of conscience? Or is this just another clever way to cover your tracks and have a dollar each way on the grey?

The trick about living life as a grown up, Sam, is the way you actually chose to live it, and the kind of person you want to be.

You can either live it as complete fake paid to write the opinion of others – or you can try to live it as a genuine human being who understands what it means to care deeply for others – and step up and try to do something about it.

Below is Sam’s revealing interview in the NZ Bachelor of the Year

https://www.youtube.com/watch?v=JHcCA1M_XQM

1. Sam’s Bachelor interview in High Heels and Hangovers.

HIGHHEELS AND HANGOVERS – BLOG
Bachelor of the Week: Sam Trethewey

Ladies (and some of you gents!) today’s Bachelor is a man of the land! Yes that’s right, he’s a Farmer on a mission to promote Australian grown produce.

A Tasmanian who is a third generation farmer, he escaped to the mainland and now lives in Victoria on a family farm.

While he’s handy with a tractor, training dogs and mustering sheep, (control yourself ladies!) he’s known to be a bit of a sweet talker and wordsmith too with his own blog on Stock Journal www.stockjournal.com.au/blogs/think-clearly-get-muddy A man whose good with his hands and his mind! Could he be the real deal??

HH&H pressed Mr Farmer on all the worldly questions..

What are three qualities you like in a girl?

Independence, soulful and passion

If you could play any character in any movie, who would it be?

Ha ha, tough one. Mark Darcy off Bridget Jones was a close 2nd… Not just because I own a reindeer jumper… But my choice is Tristan, Brad Pitts character in “Legends Of The Fall”.

Are you a boxers or brief boy?

Boxers, eiw – That’s like you using a t-shirt as a bra! Boy-shorts/trunks please!

What’s currently on your nightstand?

Lucas paw-paw, a glass of water, a clock and “Waiting for Sunrise” by William Boyd.

What was the last song you downloaded?

“It’s not over” by Panama

What has been your biggest career highlight so far?

Being identified as a leader in Australian agriculture and working with young people in farming and agribusiness.

If you were stranded on a desert island, what 3 items would you take with you?

My dog, my knife and a notepad and pen.

2. Sams column this week.

GET MUDDY

Managing collateral damage

Posted By: Sam Trethewey on 16/12/2014 3:00:00 AM | Comments (0)

Blaming banks for rural debt is like blaming McDonalds for obesity

FARMERS are where we are in Australia today because of the choices we’ve made. Business decisions that justify taking on debt given the geography, historical data and terms of trade for areas concerned are ‘ballsy’ to say the least.

If you want to enjoy the fruits of financial leverage, you have to be willing to pay the price. If the price you are prepared to pay doesn’t include your property, don’t write it in as collateral into a commercial contract with a bank. For some, this will be telling you how to suck eggs - for others, this may be a painful truth you are learning the hard way.

Last week seemed a week of wins for agriculture, farm businesses drowning in debt, the federal government and some vet from Toowoomba.

Barnaby Joyce put his foot down and shook a fist at the big four banks. One bowed and Australians saw the government that many love to hate finally get a run on the board. It was a win for the “shocked, humiliated and penniless farmers” that now live like“hunted refugees”. These were the words of Queensland veterinarian, Dr David Pascoe. You should read some of his eloquent tales of misfortune, spammed across Australian social media. With such fulsome narratives to hand, who would read novels?

As a result of either the recent rural debt summit, a cranky press release from Bob Katter, a well-orchestrated Facebook campaign backed by a radio personality or a calculated business management decision (you be the judge), ANZ announced it would freeze foreclosures on drought-affected farmers and also supply a few other forms of relief. What a noble deed... or was it? I’d like to know if the costs incurred by this new strategy from the ANZ bank will be written off under ‘bad debt expense’ or ‘marketing’ in their financial statements - my guess is the latter.

As for Dr Pascoe, with the help of his mate Alan Jones he has gained a large following on social media, composed largely it seems of digital rubbernecks and melodramatic magpies obsessed by shiny things like anti-commercialism. Anyone can start a stampede, but what really counts is what you do with that energy, and to date I’ve not seen any contribution made by those enjoying the publicity wagon that addresses the real threat.

That's the issue of around $66 billion debt tied to the ankles of rural Australia. A tough conversation is needed, not more emotive hype.

It’s no surprise we’re in drought, that’s an inevitable part of farming in Australia. Nigel Austin, South Australian award-winning rural journalist, said in his 1986 book Kings Of The Cattle Country: “They were men hardened by deprivation in the driest and least inviting continent on earth; men second to none in survival skills, superb stockman and tending more towards fatalism than bravado”. These men ran cattle in the north over 130 years ago and struggled in the very areas we see struggle today. This is why those businessmen, like James Tyson and Sidney Kidman, bought properties elsewhere to drought-proof their business.

Banks foreclosing on farm businesses or any business is also not a surprise. They are businesses, not charities, and owe much to their shareholders who have an interest in their returns. Simple stuff. Blaming banks for rural debt is like blaming McDonalds for obesity. They don’t force you to eat their food.

Laura Eadie, a research director for the Centre for Policy Development, stated in a Submission to the 2014 Financial System Inquiry: “Agricultural lending has outpaced production twofold since 2001. This means farm land prices have inflated beyond what farm economics justify – with the risk of widespread default in times of drought. There is an estimated $5 billion of bad debt held by major commercial banks”.

Unsurprisingly the banks will want to clear that bad debt and minimise their risk. Much of the media and flagbearers like Dr Pascoe would have you believe that these farmers are going about their daily business when the bank rocks up, demands their keys and gives them a week to pack. Foreclosures usually take up to two years, following a process of considered mediation and exploration of options between the business owners and the bank. It’s a last resort, the last decision, the last transaction, but many would have you believe its the only one. If you read an annual report from one of the big four, they detail their focus around “strategy to maintain well-diversified credit portfolios focused on achieving an acceptable risk-return balance.” It’s stated there for you, clear as day.

I asked James Walker from Agrihive for his thoughts on debt. James is also manning a property that’s been 23 months without rain in Longreach, Qld.

“Unfortunately many farm businesses set and forget. Unlike their bank, they set up a financial product and rarely review or revisit," he said.

"The interest starts to compound and the market may drift away from the initial rate which jeopardises the buoyancy of their enterprise. There’s not enough fat in the system for that.”

And that’s before we consider our dismal terms of trade and rainfall variability. Throw in a ban on live export and we have the beginnings of a really big problem, made worse by the fact too many farm businesses have been borrowing against the hope of future growth of the assets and extending their risk beyond their potential to repay.

James went on to say that the key to solving the rural debt problem is to empower producers with the best possible knowledge on their individual situation so they can draw a line in the sand on what’s best for their business.

“If you’re not equipping the borrowers with the right tools to make decisions, then even macro decisions that attack issues like policy or bank function leave these farm businesses open to being consumed by the market,” he said.

Ultimately the farm business manager has to make the decision on what’s best for them, their dependants, the property and business. James argues rallying for macro changes is critical but must be underpinned by enabling micro performance. “The farmer will defend the business interests at the lending end and not the repayment end if we can enable change in this space," he said.

Deferring foreclosures until next Christmas will do very little to help the sector, as there need to be some big changes around weather, markets, business management and property values to make change enough to keep bank shareholders happy. And if all those stars align, it will take the better part of a decade.

What are your thoughts?

Last modified onTuesday, 16 December 2014 09:28

1 comment

  • SCRAG
    SCRAG Tuesday, 16 December 2014 20:13 Comment Link

    Ian Narev told Alan Jones (at 13minutes 40 seconds) that the CBA was guaranteed after the GFC by the taxpayers to the tune of $6 billion. Hmmm. The bank had mortgages, huge one side terms, and a gravy train of fee feasting estate agents, liquidators and lawyers vs broke battlers. It's time the pendulum swung back.

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