BY SUE BOLAND
"If the profitable third of our farmers were able to represent the industry and set the agenda for debate we would hear a rural voice with constructive ideas ... Instead, the debate is driven by the unprofitable rump ... who yearn for an outdated past."
These comments, by grain farmer Celie Moar, in the October 1998 issue of the Australian Farm Journal are typical of the sneering attitude of wealthy farmers towards the majority of struggling farmers. Constant exhortations for struggling farmers to "get viable or get out" are designed to blame individual farmers for their difficulties.
Successive federal governments and the National Farmers' Federation (NFF) have blamed individual farmers for the farming crisis in order to create a political climate in which governments could deregulate agriculture, dismantle guaranteed minimum price schemes, privatise government assets and force smaller producers out of the industry.
Drought
Natural disasters such as droughts have been useful to governments for restructuring agriculture. Ian Gray, a researcher from the Centre for Rural Social Research at Charles Sturt University, told Green Left Weekly, "The philosophy behind drought policy has changed. Drought is no longer looked on as a disaster which people encounter, and that if they're helped through it, they will continue farming in the future."
Both Labor and Coalition governments have for years used drought assistance as a means of weeding out poorer farmers, by making assistance dependent on farmers proving the viability of their farm. As wealthier farmers are likely to be more viable, they are more likely to get assistance.
However, there has been another twist to drought policy. In January 1999, the Coalition government announced that it wants to cut $100 million from rural assistance payouts by pressuring farmers to insure themselves against natural disasters.
Other aspects of government policy in the 1980s and 1990s have also served to drive farmers out of the industry. Successive governments, with the active encouragement of the NFF, moved to abolish guaranteed minimum price schemes and privatise statutory marketing boards.
The deregulation of the dairy industry from July this year will abolish the guaranteed price for drinking milk, the Domestic Market Support Scheme. It is the last such scheme to be abolished and is predicted to result in the closure of between 3000 and 7000 dairy farms.
Deregulation
Each wave of agricultural deregulation has resulted in more farm closures, but a small number of farmers do benefit. A rural researcher at the University of Western Sydney-Hawkesbury, Peter Martin, told Green Left: "Sometimes it's not understood that deregulation policies advantage some farmers as against others. They certainly don't help the smaller farmers, but if a farmer's got a market edge, a lot of land, economies of scale and efficiencies through being highly capitalised, they tend to be able to make more [profit] with deregulated policies."
This explains why the NFF has vigorously lobbied successive governments to deregulate the agricultural industry. While the NFF claims to represent the interests of the farmers as a whole, not all farmers have the same interests. Some farmers get rich on other farmers' misfortune.
The NFF argues that world overproduction of agricultural products and historically low prices make deregulation and farm rationalisation necessary. A reduction in farm numbers, it says, would increase profits for the remaining farmers because a smaller number of farmers would be competing for a share of the market. But the division between rich and poor farmers is perpetuated after each round of deregulation.
While some middle-sized farms may join the ranks of the profitable minority of farms, a large percentage of them become the new poor farmers because they carry high levels of debt and don't have the economies of scale that the bigger farms have. Deregulation doesn't solve the problem of overproduction of agricultural products — it just helps to ensure that the biggest and most efficient producers reap the gains.
This is demonstrated by a 1992 Australian Bureau of Agricultural and Research Economics (ABARE) study which found that an average of 80% of the agricultural product comes off 20% of the farms. This statistic is still true today, although there are variations between rural industries. In intensive industries, such as dairying, pigs, and poultry, 90% of the product comes off 10% of farms.
The total number of farms is declining as farmers give up. Between 1979-80 and 1989-90, the number of farms fell by 2.8% per year, a total of 51,302 farms, and between 1990-91 and 1996-97 they fell by 1.4% per year, a total of 10,788 farms.
The division between a small number of rich farmers and the rest is increasing. A 1996-97 survey by rural management consultants, Holmes and Sackett, found that the top 20% of farms produced a net profit 191% greater than the average farm. ABARE's 1999 broadacre farm survey found a widening performance gap with only 31% of farms earning more than $50,000 a year.
Meanwhile, overall farm profits have been slashed by 80% since 1996 with 64% of farmers making a loss in 1997-98, according to ABARE's 1998 Australian Farm Survey. But it was the smaller farm which bore the full brunt of the losses.
As a result, a large number of small farmers could only make a living through off-farm employment. ABARE's 1998 report, People in Farming, found that 40% of farmers involved in cropping, sheep, beef or dairy farming earned off-farm wages. These wages accounted for 59% of these farm families' incomes.
Banks and agribusiness
The main problem facing small family farmers is that they are being squeezed by the increasing cost of inputs such as fertiliser, machinery, pesticides and seed, while receiving lower prices for their products. This makes these farmers easy prey for agribusiness (all the non-farm businesses involved in agricultural production).
Geoff Lawrence, rural researcher from the Central Queensland University and author of Capitalism and the Countryside: the Rural Crisis in Australia, told Green Left that the level of debt to banks and other lending institutions has grown from approximately 59% of the value of gross farm production in the mid-1980s to about 76% in the mid-1990s.
Farmers' income comes in as one lump sum a year, if it comes in at all. Because of this, most have to operate their farms with a permanent bank overdraft. This means that most farmers can't sow a crop, for example, unless the bank agrees to an increase in their overdraft.
The increasing indebtedness of farmers gives banks enormous influence over farmers' methods of production. Banks can deny further loans unless the farmer agrees to invest in the latest fertilisers, insecticides, pesticides and machinery. While most farmers might not be contracted to agribusiness firms, their relationship with the banks has a similar effect in the long-term.
Lawrence says that while the number of farmers under contract to agribusiness corporations is still a minority, their number is increasing because the contracts give them a guaranteed market and a guaranteed price.
However, contract farming can have negative effects. It ties farmers into the production regimes of large corporations, which invariably play one region off against another. Contract farmers make a big investment in machinery in order to meet their production contracts. But when their contract expires, the agribusiness company can tell them to accept a lower contract price or the product will be "sourced" from farmers in another region.
The advantage that agribusiness corporations have over farmers is that because they are highly diversified, they are relatively insulated from price fluctuations in the different branches of agricultural production. While prices are down for one farm product, they might be up in another. And even if prices for any particular farm product are down, agribusiness corporations can still accrue profits from activities such as food processing, food retail, and farm machinery sales.
'Free trade' or protectionism
The main problem for small farmers who oppose deregulation is that farmers are organised on the basis of their particular rural industry. Each of those industry bodies is dominated by the minority of large farmers in that particular industry, and they are the ones who benefit from deregulation.
It is difficult to organise smaller farmers to defend their interests separately from large farmers, and often there is a lack of clarity amongst smaller producers about what political demands would help their situation.
When tensions break out into public conflict between the different producer bodies within the NFF, it is usually between farmers who produce for the domestic market and favour protectionism, and farmers who produce for the export market and favour "free trade". "The free trade versus protectionism issue has been one that's plagued agriculture from the turn of the century and before", says Lawrence.
This conflict resulted in citrus growers leaving the NFF when they failed to win support for tariffs on citrus imports, and pork producers supporting Pauline Hanson's One Nation party as a tactic in their campaign against pork imports. Other sections of the NFF vigorously opposed the pork producers' campaign because they were nervous that other countries would retaliate with tariff barriers against Australian exports.
In addition to the other problems besetting family farmers, an environmental crisis is breathing down their necks. And this is exacerbated by the economic crisis confronting farmers.
Lawrence says that when you've got farmers who are largely unprotected from volatile world markets and prices decline, and they want to stay in agriculture, which most farmers do, they take short-term remedies. "Farmers are being forced to mine the soil to try and improve their economic circumstances."
The federal government's rural policy is consistent with its other economic policies. It is a capitalist government implementing policies to assist the profit-making potential of large companies. Hence, the company tax cuts, the GST, attacks on workers' rights, privatisation of government assets — and the deregulation of agriculture.
The government's policies won't solve the crisis of overproduction which faces agriculture and other industries. When farmers produce for a world capitalist market that is oversupplied, neither free trade nor import quotas will solve the problem.