WARRNAMBOOL and smaller urban centres throughout the south-west are next in line to feel the impact of the financial crisis affecting dairy farmers, a veteran rural financial counsellor fears.
Vince Thorne, a rural financial counsellor with Wimmera South West Rural Financial Counselling Service, said the impact of the crisis was likely to be worse than that of the drought that affected the region late last decade.
During the drought, farmers could still borrow money because their farm values had not dropped, he said.
But a significant fall in south-west dairy farm values meant banks were unwilling to lend many dairy farmers more money, Mr Thorne said.
The lack of bank finance was forcing many farmers to string out their payment of bills for farm costs such as feed and tractor repairs.
“I can see huge problems happening now for small business that cannot get payments,” Mr Thorne said.
“It will have to affect Warrnambool and all the businesses that deal with farmers.”
He urged dairy farmers and small businesses that were in financial trouble to contact him on 0429 406 761.
Mr Thorne, of Cobden, said banks were approaching dairy farmers in the south-west, concerned that their rising debts had reduced the farmers’ equity in their farms to dangerous levels.
“People are saying to me ‘the bank is putting pressure on us’,” he said. Those clients had not defaulted on their debt repayments but the banks were concerned they might not meet their interest payments next autumn.
“Many big dairy farms are on a knife edge,” Mr Thorne said.
Their costs had risen significantly with the high feed levels needed to cope with dry seasons of recent years increasing their debt.
South-west farmers faced another dry finish to the 2012-2013 season and the results of summer fodder crops were likely to be poor.
“People will have to buy more for hay or silage,” Mr Thorne said.
“The costs of those will increase.”
He said inflated prices had been paid for south-west dairy farms because of promises of a bright future for Australian dairy exports and strong competition for land from managed investment schemes and New Zealand dairy farmers wanting to establish themselves in the area.
“It pushed prices up to the point where it could not be repaid by the profit made from the land.”