A survey has found one in two South Australian grain producers are facing difficulties accessing finance or credit during the drought.
Completed by more than 130 grain producers, the Grain Producers SA (GPSA) survey highlights high levels of drought-induced debt, combined with tightening lender risk appetites, are making it increasingly difficult for growers to access the finance needed to keep their businesses running.
GPSA chief executive officer Brad Perry said the results painted a troubling picture of grain producers being pushed to the brink in the second consecutive year of a statewide drought.
“This survey confirms what we are hearing right across the state – grain producers are being met with more hoops, stricter conditions, and slower processes to secure critical finance to get them through this season and beyond,” he said.
“The survey shows there are examples of grain producers being told they don’t qualify for support due to the drought-impacted seasons, even if they’ve met their financial obligations previously.
“It’s a precarious situation for grain producers right across South Australia.”
Of those who reported difficulties accessing finance:
• Nearly 60 per cent cited issues with bank lending, followed by commercial lending (13 per cent) with key concerns raised about overdraft extension challenges.
• The most common challenges experienced by grain producers when seeking finance were a lack of cashflow (29 per cent), approval processes (24 per cent), increased interest rates (17 per cent) and stricter lending criteria (9 per cent).
• Almost 10 per cent said their bank required a formal drought declaration before assistance would be considered.
• Nearly 70 per cent of respondents said they have a dedicated bank manager, with 18 per cent stating they used to but no longer do and 10 per cent do not have one.
• The overall average experience rating for grain producers dealing with their bank or financial institution during drought is 5 out of 10.
• Only 15 per cent of grain producers surveyed said their banks proactively offered drought-related support options.
One respondent noted: “Our drought has been ongoing with seven out of eight years being significantly below average production due to lack of rainfall. This has created large cashflow issues, but also big credibility issues. Proving you can grow a crop of certain yield is getting harder to justify.”
Another said they were “selling our land to get by and using high interest credit to put a crop in this season”.
One was concerned about what the bank expected: “Banks are expecting us to sell assets to reduce debt but who has the money to buy in current circumstances? It’s just unrealistic.”
Meanwhile, another said: “[Our bank] have been really proactive in approaching us to see how we are likely travelling throughout the season and whether we may need to extend our overdraft.”
Mr Perry said responses from the survey show a lack of consistent drought relief options through financiers was compounding financial stress.
“It is highly concerning that the survey found there are still financiers telling some grain producers they’ll only consider hardship support if there’s a formal drought declaration, while comments in the survey suggest others aren’t even aware of the pressures growers are under,” he said.
The survey also found:
• Just 33 per cent of respondents had used Farm Management Deposits, with many citing they never had the sufficient surplus required to do so.
• Only 28 per cent had applied for concessional loans through the Regional Investment Corporation (RIC), with several noting the complexity or unsuitability of the criteria.
• Almost 20 per cent had used the Rural Financial Counselling Service in the past 12 months with only 2 per cent engaged in Farm Debt Mediation.
Mr Perry said GPSA would be providing the results of the survey to the state and federal governments and again writing to banks and financiers to highlight the feedback and concerns from grain producers.
“We need to ensure grain producers don’t just survive this drought but are set up to recover when seasonal conditions improve,” he said.
“Access to finance is a critical part of that equation and these survey results demonstrate that much more needs to be done.”
