Rural businesses in dairy farming regions are facing financial
hardship as farmers struggle to pay their bills, leaving huge unsecured
debts.
The trickle-down effect of last year's dairy crisis has been strongly felt in regional towns and local businesses in Victoria and Tasmania.
Some farming families, who were left owing thousands of dollars when processors slashed the milk price and forced them to pay back money, have become reliant on charity handouts.
Rural shops and service providers have been hit hard as farmers' bills have gone unpaid and business plunges into decline as spending dries up.
The downturn has led businesses to withdraw sponsorship for local sporting teams.
But there were no figures on how much money farmers owed local businesses in unsecured debt.
In Numurkah, in northern Victoria, small business owners and operators who are owed hundreds of thousands of dollars by dairy farmers are worried about when they will be paid.
Adrian Hayward, owner of Advanced Dairy Systems, has not installed a new dairy in more than a year.
"Between the two of these companies, ourselves and a vet, we worked it out [we're owed] about $1.3 million of unsecured debt," Mr Hayward said.
He said when processors Murray Goulburn and Fonterra dropped the milk price in April 2016, a year of planned work dried up overnight.
"We try to do the right thing by our customers," Mr Hayward said.
"We install milking machines; they break down, we have to have people on call to cover that, and maintain that equipment.
A survey by Rural Bank found Victorian dairy farmers' gross income fell by a staggering 70 per cent by the end of June 2016, while in Tasmania it was down 12 per cent.
The same survey found 92 per cent of farmers wanted to trade out of their difficulties by deferring loan repayments or paying interest only, while fewer than 3 per cent of farmers considered leaving the industry.
The bankrupt farmers owed him debts of $70,000 that will never be repaid, and that's on top of other clients' unpaid bills.
But Mr McGrath has to answer to his own creditors, who do not wait long to call him.
"Our creditors are nervous about the dairy industry and they deal with industries other than dairy," he said.
"We've had to consciously not support any sporting bodies, and we know what sporting bodies are to the country community," he said.
"So that's the real flow-on effect."
In the western Victorian town of Colac, end of financial year machinery sales were quiet.
Sue Kerr's family farm machinery dealership Rhys Evans could not sell the 40 new quad bikes that were ordered.
"It does worry me. We have a lot of ATVs [all terrain vehicles]. It isn't happening at the minute," Ms Kerr said.
She said dairy farmers' unpaid bills were mounting.
"We're owed nearly the million-dollar mark, which is about double what it used to be two years ago."
Daryl Quilliam, mayor of Tasmania's Circular Head Council in the state's north-west, said it would take years for locals to recover from the dairy crisis and factory closure.
He has urged dairy farmers to prioritise paying local consultants and businesses before paying corporate creditors.
"I've asked people to make sure they look after the people in the area, private owners," Cr Quilliam said.
"And the big businesses should be the last ones to be paid."
But dairy farmers know their businesses risk being shut down if they do not pay electricity bills or meet bank commitments.
Chris Howard, who works as a financial counsellor in Victoria's north-east, said he was concerned about the level of unsecured debt.
Mr Howard has been helping dairy farmers plan their payments and communicate that plan to local businesses they owe money to.
He predicted some farmers would not be able to survive in the industry and would choose to exit.
"A lot of dairy farmers would be doing it tougher now than last year, because there was still money in the system," he said.
"Now they've spent a lot more of their money, and they're still not paid any more for their milk in the past six to eight months.
"Everyone's maxed out their credit, and waiting for the opening price to come in.
"It doesn't matter whether it's the local co-op, hardware or takeaway shop, every business in a small town is going to do it tough because the farmers don't spend the money."
Mr McVilly said it was the same in other towns such as Cobden, Colac, Simpson, Camperdown and Gippsland.
"It hurts towns," he said.
The trickle-down effect of last year's dairy crisis has been strongly felt in regional towns and local businesses in Victoria and Tasmania.
Some farming families, who were left owing thousands of dollars when processors slashed the milk price and forced them to pay back money, have become reliant on charity handouts.
Rural shops and service providers have been hit hard as farmers' bills have gone unpaid and business plunges into decline as spending dries up.
The downturn has led businesses to withdraw sponsorship for local sporting teams.
Average dairy farmer debt to banks reaches nearly $1 million
According to figures from government agency ABARES, in the 2016-17 financial year the average dairy farm owed banks $937,600.But there were no figures on how much money farmers owed local businesses in unsecured debt.
In Numurkah, in northern Victoria, small business owners and operators who are owed hundreds of thousands of dollars by dairy farmers are worried about when they will be paid.
Adrian Hayward, owner of Advanced Dairy Systems, has not installed a new dairy in more than a year.
"Between the two of these companies, ourselves and a vet, we worked it out [we're owed] about $1.3 million of unsecured debt," Mr Hayward said.
He said when processors Murray Goulburn and Fonterra dropped the milk price in April 2016, a year of planned work dried up overnight.
"We try to do the right thing by our customers," Mr Hayward said.
"We install milking machines; they break down, we have to have people on call to cover that, and maintain that equipment.
A survey by Rural Bank found Victorian dairy farmers' gross income fell by a staggering 70 per cent by the end of June 2016, while in Tasmania it was down 12 per cent.
The same survey found 92 per cent of farmers wanted to trade out of their difficulties by deferring loan repayments or paying interest only, while fewer than 3 per cent of farmers considered leaving the industry.
Farmers declare bankruptcy
Paul McGrath, who along with his wife owns GV Dairy Supplies in Victoria's Goulburn Valley, has had three farmer clients declare bankruptcy this year.The bankrupt farmers owed him debts of $70,000 that will never be repaid, and that's on top of other clients' unpaid bills.
But Mr McGrath has to answer to his own creditors, who do not wait long to call him.
"Our creditors are nervous about the dairy industry and they deal with industries other than dairy," he said.
Business pulls support for local sport
Mr McGrath has reluctantly pulled sponsorship of local sporting clubs."We've had to consciously not support any sporting bodies, and we know what sporting bodies are to the country community," he said.
"So that's the real flow-on effect."
In the western Victorian town of Colac, end of financial year machinery sales were quiet.
Sue Kerr's family farm machinery dealership Rhys Evans could not sell the 40 new quad bikes that were ordered.
"It does worry me. We have a lot of ATVs [all terrain vehicles]. It isn't happening at the minute," Ms Kerr said.
She said dairy farmers' unpaid bills were mounting.
"We're owed nearly the million-dollar mark, which is about double what it used to be two years ago."
Mayor urges farmers to pay local debts first
To address its own debts, milk processor Murray Goulburn has announced plans to close two factories in Victoria and one at Edith Creek in north-west Tasmania.Daryl Quilliam, mayor of Tasmania's Circular Head Council in the state's north-west, said it would take years for locals to recover from the dairy crisis and factory closure.
He has urged dairy farmers to prioritise paying local consultants and businesses before paying corporate creditors.
"I've asked people to make sure they look after the people in the area, private owners," Cr Quilliam said.
"And the big businesses should be the last ones to be paid."
But dairy farmers know their businesses risk being shut down if they do not pay electricity bills or meet bank commitments.
Financial counselling for farmers
Farmers have been receiving help from the Rural Financial Counselling Service to access government benefits through Farm Household Allowance, and to apply for concessional loans with low interest rates.Chris Howard, who works as a financial counsellor in Victoria's north-east, said he was concerned about the level of unsecured debt.
Mr Howard has been helping dairy farmers plan their payments and communicate that plan to local businesses they owe money to.
He predicted some farmers would not be able to survive in the industry and would choose to exit.
Businesses say they need help too
The head of the Tractor Machinery Association, Tony McVilly, who runs four dealerships in Victoria, said small businesses needed help too."A lot of dairy farmers would be doing it tougher now than last year, because there was still money in the system," he said.
"Now they've spent a lot more of their money, and they're still not paid any more for their milk in the past six to eight months.
"Everyone's maxed out their credit, and waiting for the opening price to come in.
"It doesn't matter whether it's the local co-op, hardware or takeaway shop, every business in a small town is going to do it tough because the farmers don't spend the money."
Mr McVilly said it was the same in other towns such as Cobden, Colac, Simpson, Camperdown and Gippsland.
"It hurts towns," he said.
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