Drought affects town businesses

Gunnedah is a diverse agricultural and mining town located in the Liverpool Plains, with a population of more than 12,000 people and might be thought to be immune to drought.

But agricultural-based businesses make up nearly 40 per cent of its industries, and many are seeing a change in their customers spending habits.

With nearly half of the businesses in Gunnedah supplying the agriculture sector, deals are competitive.

For many, this means sacrificing more margin than normal, particularly during times of drought.

For the other 60 per cent of businesses, the drought may not be having a direct impact on profits, but customers with a smaller disposable income isnt helping.

Richard Neill, director of Ultra Lubricants, a business which supplies lubricant products and services to the agriculture sector, said many in the Gunnedah district hadnt seen a pay check from a summer or winter crop.

Were noticing the stress of the drought on our customers over the counter fairly well, Mr Neill said.

The NSW Business Chambers survey on the droughts effects found that 84 per cent of regional businesses in NSW have been negatively impacted by the dry, and Ultra Lubricants has experienced a 30 to 35 per cent downturn, on a monthly basis, from predominantly selling farm-based products according to Mr Neill.

Peel Valley Group is a John Deere Agriculture equipment supplier on the towns main street, and general manager of the Gunnedah branch, Philip John, said relying on large agricultural equipment sales, when farmers arent updating machinery, had a direct impact on the business.

If a farmer gets a cold, the dealer gets pneumonia, Mr John said.

The more profitable our farmers and our customer base are, the better our sales will be.

Both of the agricultural suppliers are struggling to maintain margins and are unable to pass on increased business costs to customers.

The businesses have seen price rises from suppliers, due to increased fuel and staffing costs, among other things but many farmers arent spending if its not necessary to running their operation.

Were absorbing all those price rises because our customers are hard up paying for a lot of things at the moment and to increase the prices would be fairly cruel, Mr Neill said.

All we will be selling is what is absolutely necessary rather than buying excess out of convenience.

Severe rainfall deficits mean that more than 95 percent of North West NSW is in drought.

Gunnedah received just over half of its 632.9 mm annual average rainfall in 2018 and a below average January rainfall hasnt relieved this.

But the drought hasnt just hit the business community this season, for many its been lingering for years, and for them it wont be resolved when decent rain falls.

This drought, particularly in Gunnedah, has been creeping up on us for the past 4 or 5 years, Mr John said.

Were an operation that can sustain this drought but we cant sustain it forever. No one can.

Gunnedah isnt new to dealing with drought and neither are its businesses, combined Peel Valley Machinery and Ultra Lubricants have been in the local market for more than 73 years.

The drought will end eventually, but businesses are putting plans in place to survive.

Agriculture is a long-term game, if you think otherwise youre in for a shock and you wont survive, Mr John said.

Gunnedahs Mayor Jamie Chaffey is concerned about the long-term impacts the drought will have, particularly when it comes to job losses in the community.

Cr Chaffey noted the drought has the ability to drive people away from regional communities towards larger cities where job opportunities are greater.

For us, every job thats lost in a community, means risk and once you lose population, you start to lose scale and capacity, Cr Chaffey said.

Gunnedahs unemployment rate has risen from 5.66 per cent in March to 6.31 per cent in June 2018.

The drought has cost Ultra Lubricants two highly skilled employees, and the business finds it hard to find quality, skilled staff.

Hopefully we can encourage them back when things pick up again, Mr Neill said.

The council is pushing for businesses to apply for hardship assistance which provides rate relief to those struggling.

The Chamber of Commerces Gunnedah Gift Card has distributed $30,000 to farmers within the district, as another form of drought relief.

President of the Gunnedah Chamber of Commerce Stacey Cooke said the money, approximately $200 per farmer, can be spent at any local business.

Its a really great example of how sourcing money coming into Gunnedah from other communities out to the farmer, and giving them an avenue to spend it within the community benefits all of us, Ms Cooke said.

Many agriculture businesses believe that funding should be given to farmers to spend within the local community, because when its agriculture industry is thriving, so does Gunnedah.

When it comes to state and federal government relief for local businesses, its hard to draw the line on who should receive help.

We now have suppliers who say theyre getting affected by the drought also and theyre in the city. Definitely start with farmers and then work back from there, Ultra Lubricants Mr Neill said.

Gunnedah is in a unique position with a booming mining industry, and as many farmers already have, those looking to supplement their income have the ability to find employment in the mines.

When you look at a drought that has lingered for so long, the damage you see is only a minor percentage of the damage, Cr Chaffey said.

Its affecting the generational farm businesses, the confidence to stay on the farm and theyre the long lasting ones that as a community, and as a country, were going to have to deal with that for the years to come.