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Drought 2002-03 - some issues

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

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Drought 2002-03 - some issues

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  1. Drought 2002-03 - some issues BRS Seminar Series Michael Taylor Secretary Agriculture Fisheries & Forestry – Australia Friday 17 January 2003

  2. Introduction • Weather: • Meteorological Situation and Outlook • Impacts: • Crop and farm production • Economic effects of the drought • Drought Policy: • Commonwealth & States • Exceptional Circumstances • New initiatives

  3. Weather - Meteorological Situation & Outlook • Rainfall (18, 12, 9 months) • the evidence • El Nino • the cause • Relief • the prognosis

  4. Weather - Rainfall - Last 18 Months

  5. Weather - Rainfall - Last 12 Months

  6. Weather - Rainfall - Last 9 Months

  7. Weather - Some Historical Droughts 3 Years 3 Years 1 Year 2 Years

  8. Weather - El Nino

  9. Weather - El Nino – The SOI

  10. Weather – Northern Pacific Ocean - Sea Temperature Anomalies Dec ‘02

  11. Weather – SOI

  12. Weather - The Future- Probability [Rain > Median Rainfall (02/03 - 04/03)]

  13. Weather - Future – El Nino Forecasts - Modelling - Decay of El Nino Warm Anomaly (red - last 15 forecasts, blue - previous 15 forecasts)

  14. Impact of the Drought • Net value of production • Farm Cash Incomes • Grain and stockfeed • Economy wide

  15. Impact : Net Value of Production

  16. Impact : Farm Cash Income

  17. 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

  18. 1994-95 2001-02 2002-03 Mt Mt Mt Wheat 9.0 24.0 10.00 Barley 2.9 7.5 3.3 Pulses 1.4 2.4 1.3 Total Winter 14.7 37.2 16.2 Sorghum 1.3 1.8 0.9 Cottonseed 0.8 1.0 0.3 Rice 1.1 1.3 0.4 Total Summer 3.6 4.8 2.0 Total All Grain/Year 18.3 42.0 18.2 Impact : Grain Production

  19. Impact: Grain Prices

  20. Impact : Grain & Stockfeed - estimated grain requirement (Mt)

  21. 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

  22. Impact : Grain Imports • Availability • quality, quantity & price • GMO issue • Risks and issues • sources • disease/pests • processing prior to distribution • devitalisation & pelletisation

  23. 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

  24. Drought Policy – General - Commonwealth/State policy • Drought not an “NDRA” matter • State responsibilities • Developments: • 1992 • 1997 • 1999 • 2002

  25. 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

  26. Drought Policy – Commonwealth - key elements • Farm Management Deposits (FMD) • FarmBis • Farm Help • Exceptional Circumstances (EC)

  27. 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

  28. 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.

  29. 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

  30. 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

  31. 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

  32. Drought Policy - New Initiative 9 December- new 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

  33. Drought Policy – Rainfall Deficit Areas - boundaries at 9 December 2002

  34. 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 by: • Centrelink

  35. 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

  36. 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

  37. 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

  38. Drought Policy – EC Areas - boundaries at 17/01/03

  39. IRRIGATION- NSW Dams 2001-2002 2001 2002

  40. Conclusion • Other issues • Weather • Impact • Drought policies • Questions

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