Rural rich get richer and bigger

December 5, 1995

By Chris Spindler Despite the drought in the eastern states some rural producers have continued to make a profit this year. They have taken advantage of depressed land values and negative returns for the majority of farmers, to increase their land ownership of rural Australia and have positioned themselves to make even bigger profits in the future. By far the biggest deal over the past year was the $161 million takeover of the Australian Agricultural Company (AustAg) by Elders. Elders bought out the Colonial Mutual Life share of AustAg to position itself for predicted lucrative beef markets in Japan and South East Asia as trade in agricultural products is liberalised under the Asia-Pacific Economic Cooperation (APEC) trade regime. This purchase confirms Elders as the biggest farm services company in Australia involved in rural land, chemicals, production, processing and retailing. The largest single corporate land-holder in rural Australia remains S. Kidman & Co. with 12.4 million hectares (an area slightly bigger than North Korea). Other companies are also gearing up for trade liberalisation. Janet Holmes a Court has sold parts of her Heytesbury Pastoral Company to fund beef distribution in Malaysia. Heytesbury is left with 19 properties, running the third most cattle (250,000) in the country. Many other of the big investors such as National Mutual Rural Enterprises (owned 51% by French insurance company AXA), Kerry Packer, BHP, Rupert Murdoch have either been buying up properties or remain in the top rural land-holders. Another indicator that big agribusinesses are getting bigger at the expense of small or family farms is the expected growth of the rural work force as a proportion of the total work force. Over recent decades the rural work force has declined as technology has substituted for jobs. However, this trend is expected to change over the next decade as large rural enterprises buy out smaller holdings and need larger work forces. Better world prices for agricultural products and recent rains have guaranteed, for many, a boost to cash farm incomes. However many small farms still won't survive because of increased debt and the long-term trend of worsening terms of trade for farmers. This year total rural debt soared past $18 billion, and farm costs continued to rise in relation to farm earnings. During the drought this has meant that the bottom third of farmers, largely small and family farms, recorded negative incomes, negative profitability and negative returns on capital investment. Returns for the middle group of farmers was negligible. Even recent price increases of around 20% for some produce doesn't seem to have saved the poorest farmers. For example, despite an 18% wool price increase, the bottom 20% of wool producers in the Monaro region lost $1.60 per hectare while the top 20% made $59.49 per hectare. Thousands of small and family farms have already disappeared (about 25 every week for 35 years) and some 20-30% of the bottom 110,000 rural producers are also at risk. Federal and state government policies have increased this trend. Rural assistance is generally only available for producers who are expanding their operations and investing — hardly an option for producers with negative incomes.

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