Australia: Struggle to Invest Amid Drought Risk

As Chances of Water Shortages Increase, Australian Farmers' Efforts Intensify

When a scorching drought struck easternAustraliain 2006, cattle farmers Robyn and Paul Kendal had to slaughter nearly all theirlivestockand spend around a year of their normal turnover on feed to keep the remainder alive.

With a recurrence of El Nino, the weather pattern behind the drought, looming and dry conditions already affecting an area larger than South Africa, another major drought could be one struggle too many for farmers such as the Kendals.

"In 2006, we saw the lowest amount of rains here since records began...and we still haven't recovered from that even today," said Robyn Kendal, whose 3,000-acre (1,215 hectares) cattle farm is about 500 km (300 miles) southwest of Sydney.

Already one of the world's top agricultural producers,Australiahas ambitions of becoming a "food bowl" to Asia as it tries to diversify itseconomyto counter the waning of a decade-long mining boom that brought the country riches.

That goal is threatened by its harsh climate - private insurance to protect against drought is generally too expensive for farmers, undermining their capacity to invest to boost output as they must if Australia is to feed more of Asia's fast-growing middle class.

Drought is a traditional foe in Australia, the world's third-biggest beef exporter and a big producer of crops such as wheat and sugar. But an inability to contain the risk means less money available to channel into new equipment or technology for farmers already saddled with a record A$64 billion ($59 billion) of debt.

DROUGHTS AND PRODUCTIVITY

The 2006 drought resulted in Australia's agricultural GDP falling by nearly 30 percent, according to government data, and the country's weather bureau is forecasting that such events will become harsher and more frequent.

The drought in Queensland alone last year meant farmers in the state recorded their lowest income on record, with the average farmer making a loss of A$77,000, according to government data.

With more than 80 percent of Queensland declared by the state government to be in drought, the outlook for the state's agricultural producers looks bleak.

The dry weather means that the current wheat harvest for the 2014/15 crop year in Queensland is seen falling to 1.33 million tonnes, the Australian Bureau of Agriculture and Resource Economics and Sciences (ABARES) said in June, 12 percent below the five-year average. And analysts say that figure could fall even more with dry weather seen continuing until October at least.

Cattle farmers in the state, Australia's largestlivestockproducing region, are also struggling. Unable to find enough food or water for their animals, farmers have been forced to slaughter their livestock at record levels, pushing prices to all-time lows earlier in the year.

Source: Reuters

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