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February 11, 2014 Tuesday 8:41 PM AEST
Grain milling boss says farmers and food production system in trouble
The head of one of the country's biggest grain milling companies says the current drought is not only posing a risk to farming families, but to Australia's ability to supply its customers.
Australia Milling Group exports pulses, cereals and oil seeds into the international market place.
The company has facilities at Bowmans in South Australia, Horsham in Victoria and Narrabri in New South Wales.
Chief Executive Officer, Peter Wilson, says no one should underestimate the crisis now gripping Australia's food production system.
"We've got to buy that grain off farmers who are increasingly running shorter and shorter of supplies," he said.
"Domestic prices continue to firm which is compromising export margins so it's an extremely tough environment."
Peter Wilson says grain supplies are dwindling and the sowing of some winter crops may not take place at all.
"The profile in these beautiful soils here in the northern part of Australia is completely dry, I mean, you've got very large cracks in the ground to the point where just walking across some of these paddocks you could quite easily do an ankle," he said.
"With livestock, if you start losing the ability to water the stock then they can't get up and then they either die a very lonely death, or they must be shot."
Peter Wilson says the farmer is a very resilient individual but these dry conditions have heaped pressure upon pressure.
He says they'll be making key decisions over the next six weeks about what crop they'll sow, or if they'll sow any crop at all.
"Because it has been dry for so long we haven't seen the farmer forward sell," he said.
"He's not out there selling, for example, his 2014/15 cereal or pulse harvest in northern Australia because he doesn't know whether he's going to plant a crop yet."
Peter Wilson says it's unlikely there'll be any problems with non-performance against contract, cancellations or penalties because there hasn't been enough activity at the farm level.
But he says the knock-on effect will be felt by companies like his that value-add to the grain.
"Where it will impact businesses like ours is our ability to provide the sort of product that the end customer has come to know and love from Australia," he said.
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