Transcript No Slide Title

Drought 2002-03
- some issues
BRS Seminar Series
Michael Taylor
Secretary
Agriculture Fisheries & Forestry – Australia
Friday 17 January 2003
Introduction
•Weather:
•Meteorological Situation and Outlook
•Impacts:
Crop and farm production
Economic effects of the drought
•Drought Policy:
Commonwealth & States
Exceptional Circumstances
New initiatives
Weather
- Meteorological Situation & Outlook
 Rainfall
(18, 12, 9 months)
 the evidence
 El
Nino
 the cause
 Relief
 the prognosis
Weather - Rainfall - Last 18 Months
Weather - Rainfall - Last 12 Months
Weather - Rainfall - Last 9 Months
Weather - Some Historical Droughts
3 Years
3 Years
2 Years
1 Year
Weather - El Nino
Weather - El Nino – The SOI
Weather – Northern Pacific Ocean
- Sea Temperature Anomalies Dec ‘02
Weather – SOI
Weather - The Future
- Probability [Rain > Median Rainfall (02/03 - 04/03)]
Weather - Future – El Nino Forecasts
- Modelling - Decay of El Nino Warm Anomaly
(red - last 15 forecasts, blue - previous 15 forecasts)
Impact of the Drought
 Net
value of production
 Farm Cash Incomes
 Grain and stockfeed
 Economy wide
Impact : Net Value of Production
Net Value of farm production, 1980-81 to 2002-03
(2002-03 dollars)
12.0
10.0
6.0
4.0
2.0
20
02
-0
1
20
00
-9
7
19
96
-9
3
19
92
-8
9
19
88
-8
5
19
84
-8
1
80
-0
3
0.0
19
$billion
8.0
Impact : Farm Cash Income
Farm cash income, by state,
1977-78 to 2002-03(preliminary)
160000
New South Wales
140000
Queensland
Victoria
120000
$ (real)
100000
80000
60000
40000
20000
0
-20000
8
9
0
1
2
3
4
5
6
7
8
9
0
1
2
3
4
5
6
7
8
9
0
1
2
3
-7 8-7 9-8 0-8 1-8 2-8 3-8 4-8 5-8 6-8 7-8 8-8 9-9 0-9 1-9 2-9 3-9 4-9 5-9 6-9 7-9 8-9 9-0 0-0 1-0 2-0
77
7
7
8
8
8
8
8
8
8
8
8
8
9
9
9
9
9
9
9
9
9
9
0
0
0
20
20
20
Impact : Agriculture Revenues
ABARE Forecasts:
 Farm incomes- lowest in 20 years
 Net value of farm production
 estimated to fall to $2.2 billion in 2002-03
 from $10.1 billion last year (down 80%)
 compares with $0.5 billion in 1982-83

Rural & regional economies
 severely depressed in drought areas
Impact : Grain Production
1994-95
2001-02
2002-03
Wheat
Barley
Pulses
Total Winter
Mt
9.0
2.9
1.4
14.7
Mt
24.0
7.5
2.4
37.2
Mt
10.00
3.3
1.3
16.2
Sorghum
Cottonseed
1.3
0.8
1.8
1.0
0.9
0.3
Rice
Total Summer
1.1
3.6
1.3
4.8
0.4
2.0
Total All Grain/Year
18.3
42.0
18.2
Impact: Grain Prices
Grain prices, July 2002 - January 2003
450
ASW export
400
ASW domestic
300
US sorghum
250
200
UK feed w heat
150
3-Jan
20-Dec
6-Dec
22-Nov
8-Nov
25-Oct
11-Oct
27-Sep
13-Sep
30-Aug
16-Aug
2-Aug
19-Jul
100
5-Jul
$A/t
350
Impact : Grain & Stockfeed
- estimated grain requirement (Mt)
No drought
Drought
Change
Poultry
Pigs
Feedlot
Dairy
Grazing
Ruminants
1.52
1.43
2.17
1.43
0.48
1.45
1.14
2.01
3.82
5.49
-0.07
-0.29
-0.16
2.39
5.01
TOTAL
7.03
13.91
6.88
Impact: Grain & Stockfeed
- outlook
 Pasture production – little available
 Roughage (hay, etc) – little available
 Winter grain crops
(wheat, barley, canola, lupins)
 down to 14.5m tonnes in 2002
 compared to 34.1m tonnes in 2001
 compared to 13.2m in 1994-95 drought
 Imports
- limited
Impact : Grain Imports
 Availability
 quality, quantity & price
 GMO issue
 Risks
and issues
 sources
 disease/pests
 processing prior to distribution
 devitalisation & pelletisation
Impact : Economy Wide

ABARE estimates
 0.75% negative impact on GDP
 rural exports decline 11.6%

Treasury in its November 2002 Outlook
 Confirms ABARE’s estimated 0.75%
negative impact on GDP.
 Warns that the current account deficit is
likely to widen due to the drought
Food prices
 Comparisons

 fire, flood
Drought Policy – General
- Commonwealth/State policy
 Drought not an “NDRA” matter
 State responsibilities
 Developments:
• 1992
• 1997
• 1999
• 2002
Drought Policy – Principles
- Commonwealth/State policy

Encourage primary producers to adopt self-reliant
approaches to managing for drought, while at the
same time relieving financial stress for farm families
 Maintain and protect Australia’s agricultural and
environmental resource base during periods of
extreme stress and
 Ensuring early recovery of agricultural and rural
industries, consistent with long-term sustainable
levels
 Support provided after substantial state
commitment
Drought Policy – Commonwealth
- key elements
 Farm Management Deposits (FMD)
 FarmBis
 Farm Help
 Exceptional Circumstances (EC)
Drought Policy – Commonwealth
- exceptional circumstances
 Criteria:
• 1:20 / 25 year (“one in a generation”) event
• severe & prolonged impact on farm incomes
• event is not part of normal structural process
 Process:
• State / Farm Peak Body make submission
• submission assessed by NRAC
• time to assess (Historically 2 months +, but
reducing)
 Benefits:
• EC Relief Payments (ECRP)
• Business support
Drought Policy – Commonwealth
- exceptional circumstances

ECRP (Exceptional Circumstances Relief Payments)
• Criteria - no work activity test
- exemption for essential farm assets
• Benefit - equivalent to New Start program
- approx. $600 per fortnight (family of 4)

Business Support
• Criteria – viable, needs based, off-farm assets test
• Benefit - 50% interest rate subsidy
on new/existing debt for 2 years (max $100K pa)
• Funding – 90% + Commonwealth, rest – States
• Administration – State Rural Adjustment Auth.
Drought Policy – EC Applications 2002
 16 EC applications received since September
 3 areas EC declared in November/December
– 2 in NSW
– 1 in QLD
– Decisions on some areas deferred pending rainfall
analysis over December/January
 Approx 20 other EC applications anticipated in
next few months
Drought Policy - New Initiative
September 2002
- Prima Facie EC Drought Area
 Criteria:
• drought area defined by State
• criteria same as EC
• preliminary desktop assessment
 Purpose:
• provide support pre full EC assessment
 Benefit:
• Income Support for 6 months
Drought Policy - New Initiative November
2002
- Additional Measures

Farm Management Deposits – early access
 12 month delay waived without negative tax implications

Personal counselling to rural communities
 $2m in 2002-03 delivered through FACS

Australian Government Envirofund
 Drought recovery round ($10m for targeted works)

Pest animal management grants program
 $1m in 2002-03 for humane pest reduction

Country Women’s Assoc Emergency Aid Fund
 $1m in 2002-03 to assist in helping/supporting farmers

FarmHand - $5m
Drought Policy - New Initiative 9 Decembernew Rainfall Deficient Areas defined
 Criteria:
• rainfall deficiency > 1:20 years for 9 mths
• if State area deficit > 80%
then total state declared (ie NSW)
• creates immediate eligibility
• applies only to 2002/03 drought
 Extends drought areas beyond:
• EC areas
• prima facie EC areas
Drought Policy – Rainfall Deficit Areas
- boundaries at 9 December 2002
Drought Policy - New Initiative
- interim income support for farmers
 Criteria:
 in a prima facie or rainfall deficient area
 income & assets same as for ECRP
 Benefits:
 Income Support for 6 months
 Administered
 Centrelink
by:
Drought Policy - New Initiative
- farmer interest rate relief

Criteria:
 area- EC, prima facie, or rainfall deficient
 off-farm assets test

Benefits:
 Interest subsidy (5% or 50% of current)-2 years
 maximum loan – $100,000 (new & additional)
 purpose – stock support & drought recovery

Administered by:
 Centrelink
Drought Policy - New Initiative
- small business interest rate relief

Criteria:





area EC declared or 60% dependant
business solvent & < 20 full-time employees
income decline related to EC
owner’s primary income source
Benefit:
 interest subsidy (5% or 50% of current)-2 years
 maximum loan – $100,000 (new & existing)
 purpose – business support & recovery

Administered by Centrelink
Drought Policy - New Initiative
– work for the dole – Drought force

Criteria:
 drought affected area & unemployed

Purpose:
 skill retention & drought mitigation

Benefit:
 job-seekers immediately eligible for training
 training credits of $800 (2 days per week)
 access to job-matching service

Administered by:
 Community Work Co-ordinators
Drought Policy – EC Areas
- boundaries at 17/01/03
%
IRRIGATION- NSW Dams 2001-2002
90
80
70
60
50
40
30
20
10
0
1
4
3
5
7
Months
9
11
13
Total Water Storages in the MDBC
100
90
80
Percent of Full Capacity
70
60
50
40
30
20
10
2001
0
January
2002
February
March
April
May
June
July
Month
August
September
October
November December
2003
Conclusion
 Other
issues
 Weather
 Impact
 Drought policies
 Questions