(Farm auction, auctioneer and bidders, buying and selling)

QUENTIN MCDERMOTT: Scores of bargain-hunters flocked to this wheat farm in country Victoria last month to bid in a clearing sale.

It was hot, windy, and dusty.

On a day of frantic buying and selling, the message was: everything's on the block...

AUCTIONEER: Anybody got a dollar for it? Restore that for a dollar.

QUENTIN MCDERMOTT: From the cheapest bargains in the paddock...

AUCTIONEER: And it has new back tires on it, you may well have noticed...

QUENTIN MCDERMOTT: ... to the most expensive.

AUCTIONEER: One-eighty-five or 195 to start it. Ninety and eighty-five to start it. Anybody interested for?

Seventy-five anybody? Seventy-five for it? Seventy-five thousand or we leave it, I think. All out, all over, what do we do Jim?

JIM: I'm going to leave it there ...

QUENTIN MCDERMOTT: The sale came after 11 years of drought, and marked the end of a lifetime in farming for Vince McNicol and his sons Danny and Eddie.

VINCE MCNICOL: I'm 81 years of age. These two lads have got a future coming up to them and I wasn't going to stand in their way. And I just find it's very, very hard to see where we're going to finish up.

QUENTIN MCDERMOTT: Large tracts of farming land remain in drought despite the recent floods. Even if the rains continue, climate change may have devastating consequences for many farms across southern Australia.

As the debate about climate change intensifies, are we seeing a major shift in how we farm? And will family farms be blown away?

(On screen text: "Winds of Change"; "Reporter: Quentin McDermott)
(Excerpt from archive footage, Cinesound, 1944):

NARRATOR: The Victorian Mallee country is possessed of a miracle topsoil which will grow anything, with adequate water. Now owing to wind erosion, aggravated by drought, it is facing ruin. This was a farm, the miracle soil has gone with the wind and valuable wheat land has become a desert. The sand was beneath the topsoil and now...

(End of excerpt)

QUENTIN MCDERMOTT: During the 1940s, when climate change wasn't yet part of the national vocabulary, Victoria suffered one of the worst droughts on record.

(Excerpt continued):

NARRATOR: We have sown the wind, and are reaping the whirlwind, a whirlwind which, if strong, effective barriers are not erected against it, will sweep this nation's prosperity away!

(End of excerpt)

QUENTIN MCDERMOTT: Today's drought is worse than previous droughts in one important respect, most experts agree.

DR PETER MCINTOSH, CSIRO MARINE AND ATMOSPHERIC RESEARCH: What makes this drought worse than back then is climate change is warming Australia, and the warmer it gets, the more evaporation you get so the same amount of rainfall is less effective for farmers.

QUENTIN MCDERMOTT: For the last decade, the north-west Victorian wheat belt has sweltered in the heat, labouring under successive years of low rainfall.

While some farmers have sold up, but most have struggled on, using new farming methods to combat the drought.

This film follows five farming families and looks at the changes and choices they've made as they grapple with drought and climate change.

"Four Corners" first visited the families before Christmas. They live around the tiny town of Birchip and are typical of its 800-strong community.

(On screen text: "The Ferriers")

Last December's harvest looked impressive - in fact it was anything but.

PETER FERRIER: We thought this year was going to be the year up to about August and then it just decided not to rain anymore. It fell over. It was pretty hard to take as, pretty well what would I call it, it was soul destroying at times.

JOHN FERRIER: We had a quite a big cropping program on so we actually had sown a lot of crop. We also had moved into hay for the first time to do some export open hay production. The season was going along very smoothly until the spring when the rain just stopped.

QUENTIN MCDERMOTT: The Ferrier brothers, John and Peter, are well known around the Mallee. But their skills as farmers couldn't prevent last year's harvest falling well short of what they'd hoped for.

JOHN FERRIER: On our budgeted production and the sort of hectares that we were doing, we were looking at producing somewhere between 8,000 and 10,000 tonne of grain. Actual production is going to be more like about 2,000 tonne of grain.

QUENTIN MCDERMOTT: John Ferrier's children, David and Kate, are testament to the fact that a tiny rural town can attract young people to stay.

KATE FERRIER: I've moved back close to Birchip a year ago and I have made so many friends within this district, all involved in agriculture. And it will continue to bring young people here, no matter what the weather's like because in a drought, you know, they're the people that are pushing for change and are going to make change happen.

DAVID FERRIER: For me Birchip's got everything that I want and it's an enjoyable place to be around and be a part of.

QUENTIN MCDERMOTT (to David Ferrier): Do you see yourself staying here and staying on the farm indefinitely?

DAVID FERRIER: I'll be here forever (laughs).

QUENTIN MCDERMOTT: But on Peter Ferrier's side of the family, his three sons have moved away and have no plans to return.

John and Peter Ferrier have run the farm together for years. But successive bad seasons have taken their toll on Peter Ferrier and his wife.

PETER FERRIER: For some reason farmers are very resilient and they just keep going and it makes you wonder at times why.

QUENTIN MCDERMOTT (to Peter Ferrier): Well are you keeping going?

PETER FERRIER: Me, no. My wife, Sue, and I have made a decision that it's come a time there where we want to move on in our life and do some other things.

QUENTIN MCDERMOTT (to Peter Ferrier): How stressful has it been for you and for Sue?

PETER FERRIER: To be quite honest, I've battled. At times it's been really hard. And it's hard on the relationship too, but Sue's been good and she's been very supportive. But there's a lot of supportive people in the community which is what we need at this time.

(On screen text: "The McClellands")

QUENTIN MCDERMOTT (to Ian McClelland): This is a lovely spot, is there a favourite time for you to come here?

IAN MCCLELLAND, CHAIRMAN, BIRCHIP CROPPING GROUP: I tend to look at it more in the evening than in the early morning, but I have been here in the early morning, and I've found ducks on this little pond...

QUENTIN MCDERMOTT: Anne and Ian McClelland cherish the small oasis they've created on their large property outside Birchip. Like the Ferriers though, they've been hit hard by the drought.

IAN MCCLELLAND, CHAIRMAN, BIRCHIP CROPPING GROUP: The last 11 years have been below average years. The last six in particular have been quite devastating. In fact our rainfall for the last six have been 35 per cent below average and for the last 11 years have been 20 per cent below average.

QUENTIN MCDERMOTT (to Anne McClelland): What have the last 10 years been like for you?

ANNE MCCLELLAND: (Sigh) They have been character building, but I didn't really want my character built in that way. I think I was accustomed to the ups and downs of life in the Mallee; we didn't expect to have a good year every year. But steadily decreasing rainfall and a disproportionate number of bad years have made things pretty hard, emotionally they've made them very hard.

IAN MCCLELLAND, CHAIRMAN, BIRCHIP CROPPING GROUP (standing in field): ... like we have the last 10 years. I mean, chick peas, these are chick peas, that have only grown in the Wimmera Mallee probably the last 14, 15 years...

QUENTIN MCDERMOTT: Ian McClelland is passionate about science. He's chairman of the Birchip Cropping Group, which is helping farmers find new ways of coping with drought and climate change.

IAN MCCLELLAND, CHAIRMAN, BIRCHIP CROPPING GROUP: Science is going to be crucial in this whole adaptation for farmers, and they'll through genetic engineering they'll put a frost gene in, frost-resistant gene in a wheat crop which will be fantastic for farmers, or it would do a drought-resistant gene. But also we'll get completely new crops.

QUENTIN MCDERMOTT (to Anne McClelland): Do you want Ian to stay to remain a farmer?

ANNE MCCLELLAND: Oh it's not a question. I mean I know that lots of wives would say, "Oh, why don't we leave?" It was never, never a question and my son who is fully aware of what's going on, he still wants to come back here. I don't think it's a very logical wish but it's something that's inbred in him, it's like a gene; like some people can't spell - he wants to be a farmer.

(On screen text: "The McAllisters")

DON MCALLISTER: The spring rains in October didn't materialise. The crops started dying and the sheep got skinnier and feed ran out and I would say October this year, a couple of months ago, were by far the worst that we've experienced on this farm.

QUENTIN MCDERMOTT: Many farmers are fighting grimly against the drought, but some, like Don McAllister, have dug themselves deeper and deeper into debt.

When "Four Corners" visited Don McAllister's farm in December, he was reeling from the aftermath of a bad year and borrowings which were uncomfortably high.

DON MCALLISTER: I reckon in my 20 years of farming we virtually hit rock bottom in that we had no feed, the crops looked like they were going to fail. Money reserves had run out. Our bank manager had said, look, we'd virtually over-extended our borrowings six months prior, so we looked like we just had nowhere to turn.

We're way over and I think we've just started to realise it, you know, we're going to be probably the next 10 years paying it off so, you know, I can't see myself sort of getting out of debt before I retire unfortunately.

QUENTIN MCDERMOTT (to Don McAllister): You say you're way over, can you give me a figure?

DON MCALLISTER: We'll we're paying interest on over three quarters of a million, yeah.

QUENTIN MCDERMOTT: Don McAllister applied for the Government's exceptional circumstances funding, just to survive. The subsidy paid for 50 per cent of the interest on his borrowings.

DON MCALLISTER: That equated to something like 30-odd thousand or something, so it was it was fantastic, yeah. And honestly I don't know where we'd be without it.

QUENTIN MCDERMOTT: Don McAllister isn't the only farmer saddled with large loans.

(On screen text: "The Smiths")

Almost every farmer we spoke to in December is borrowing substantial sums against the capital value of his property. Brothers David and Ian Smith, who run their farm together and are highly respected locally, are typical.

QUENTIN MCDERMOTT (to David and Ian Smith): Have you taken out large loans?

DAVID SMITH: Yes, we have, yes certainly have, and they're a real worry with rising interest rates.

QUENTIN MCDERMOTT (to David and Ian Smith): Can you tell me how indebted you are?

DAVE SMITH: No (laughs).

IAN SMITH: A lot.

QUENTIN MCDERMOTT (to David and Ian Smith): So, what are you raising the money for?

IAN SMITH: Just for ongoing costs, to put the next crop in.

QUENTIN MCDERMOTT: Australia has one of the most variable climates in the world for farming, and the Smith family believes that that's played a more significant role in the decade-long drought than climate change.

IAN SMITH: I cannot say that this last 10 years has been a result of climate change. It's a result of climate variability. We've had similar periods to this in the last hundred years - at least two - so I'm a firm believer that we'll go back to having good times again. But I do also believe that climate change is a fact of life.

QUENTIN MCDERMOTT: Despite his reluctance to blame climate change for the string of droughts they've weathered, Ian Smith was determined to do his bit last December.

IAN SMITH: So in February we're going to put 20 solar panels on our roof. It'll cost us a lot of money and we won't make any money out of it but it's just a moral issue that we've decided to go down that track and so people can drive past our house and say, okay, they're doing something about solar.

QUENTIN MCDERMOTT (to Brianna Smith, walking through field): So, Brianna, show me why it is why you weren't able to harvest it.

QUENTIN MCDERMOTT: David Smith's daughter Brianna is one of those young people who will have to return to the farm if properties like this are to survive as family businesses.

BRIANNA SMITH: This is like one seed that we've planted here...

QUENTIN MCDERMOTT: When "Four Corners" met her in December, she was coming to terms with the fact that farming is a hard business.

As part of an agriculture project at school, she borrowed one of her father's paddocks and planted lentils.

They failed - for lack of rain.

BRIANNA SMITH: The deal was I'd pay him back for what it cost me to do the project which was about close to $4000, so I lost $4000.

QUENTIN MCDERMOTT (to Brianna Smith): Mmm...

BRIANNA SMITH: ... and the deal was after I paid that back I decided that I wouldn't keep any of the money and that we'd put it towards (thunder) the farm to get a GPS system (thunder, laughter).

QUENTIN MCDERMOTT (to Brianna Smith): So you just wish that this had happened basically?

BRIANNA SMITH: Yeah, if this had happened in August, September and October that would've been fantastic.

QUENTIN MCDERMOTT (to Brianna Smith): You'd be laughing now?

BRIANNA SMITH: Yes I would be, I'd be very happy.

QUENTIN MCDERMOTT (to Brianna Smith): And what's the lesson you've learned from this exercise?

BRIANNA SMITH: Oh, farming is very risky.

QUENTIN MCDERMOTT: That day, the heavens opened, sending the ants scurrying for cover. The next day it rained again, sending Chris Rickard and his farmhand Josh scurrying for cover. It was welcome relief from the unrelenting heat, but it had come at the wrong time.

CHRIS RICKARD: We could finish the year with 17 or 18 inches but unfortunately we didn't get it when we needed it in the growing season and we had barely little rain at all in July, August, September right through to October.

(On screen text: "The Rickards")

QUENTIN MCDERMOTT: Local wheat farmer Chris Rickard is another who made the most of a bad year - in his case, by baling the failed crops for hay.

CHRIS RICKARD: The poorer crops we cut for hay, and we've just finished harvesting our last crop yesterday, and it was a pea crop, and we're just baling up a bit of straw behind the header. So, it's not something we normally do, but after a poorer season money's been a bit tight. We thought we'd bale up a bit of pea straw for a bit of pocket money for the kids.

CHRIS RICKARD (to wife): It's raining again.

MRS RICKARD: Yeah, but it never rains when you need it.

CHRIS RICKARD: No.

QUENTIN MCDERMOTT: The Rickard family were determined to have a happy Christmas. But underlying the cheerful mood were serious concerns about the family's financial status.

CHRIS RICKARD: Last year it was it was very stressful, considering we had no income from the year before and I held all my harvest in one truck load the year before and the prospect of not receiving any income again this year which is what it was looking like in September was very daunting, yes.

QUENTIN MCDERMOTT: As if the failed harvest and huge debts were not enough, some of Birchip's farmers were brought to their knees after entering the futures market, or forward selling their grain when wheat prices were between $250 and $280 a tonne.

CHRIS RICKARD: They were as high as they'd been for 10 years at that stage. And we had some pretty aggressive salesmen running around telling us that we needed to lock a bit of this in and that we needed to lock in some of our season harvest for the following season.

QUENTIN MCDERMOTT: As the growing season collapsed, the price of wheat rocketed to $380 a tonne and higher.

Some farmers have told "Four Corners" that, unable to grow enough grain, they lost hundreds of thousands of dollars after having to buy out their contracts or deliver their harvest at locked in prices far below the going rate.

CHRIS RICKARD: It's a pity that we weren't given perhaps better advice and people weren't left exposed to such high losses that were accumulating with the increase in the grain price in Chicago and domestically.

QUENTIN MCDERMOTT: With December's rain, Birchip's spirits lifted, bringing hopes of a better year in 2008.

As the rain clouds passed, children welcomed Santa's arrival in a big red tractor and farmers and their families flocked to Birchip's public hall to sing carols.

When "Four Corners" returned to the Mallee in February, it was clear the drought hadn't broken. Birchip has registered just 40 millimetres of rain this year.

As El Nino has given way to La Nina, storms have flooded large parts of Queensland and New South Wales, bringing hopes of an end to the Big Dry.

But not in the Mallee.

DR PETER MCINTOSH, CSIRO MARINE AND ATMOSPHERIC RESEARCH: La Nina doesn't necessarily translate into good rainfall in this part of the country. It's really only for Queensland and parts of New South Wales, although there is a little bit of a signal here but not a very strong one.

Up in this region the Indian Ocean is just as important as the Pacific Ocean and so the Indian Ocean dipole is an important effect.

QUENTIN MCDERMOTT (to Dr Peter Mcintosh): What effect does it have?

DR PETER MCINTOSH, CSIRO MARINE AND ATMOSPHERIC RESEARCH: Well when the Indian Ocean dipole is positive so that we have cool water north of Australia, we tend to get less rainfall here.

QUENTIN MCDERMOTT: Birchip's farmers are keen to forge partnerships with scientists like peter McIntosh, who works for CSIRO Marine and Atmospheric Research.

DR PETER MCINTOSH, CSIRO MARINE AND ATMOSPHERIC RESEARCH (at farmers' forum): This talk should have really been entitled "Misunderstanding the Climate", because last year, my goodness, how do you understand that? It was essentially unprecedented...

QUENTIN MCDERMOTT: But in an increasingly complex scientific and economic environment, even specialists like Peter Mcintosh - a popular speaker at farmers' forums like this one - can't be certain with their predictions.

DR PETER MCINTOSH, CSIRO MARINE AND ATMOSPHERIC RESEARCH (at farmers' forum): History seemed to indicate that last year had a nine out of 10 chance of being wet. And now that chance is nine out of 11, because it wasn't (laughter) ...

QUENTIN MCDERMOTT: Here in the Mallee, some farmers don't believe that climate change has played a significant part in the current drought. They believe that the drought will break and the good times return.

It's a question which scientists like Mark Howden - a leading advisor on climate change and adaptation - are still exploring.

QUENTIN MCDERMOTT (to Mark Howden): Is that drought the product of climate change?

DR MARK HOWDEN, INTERNATIONAL CLIMATE CHANGE EXPERT, CSIRO: It's a really good question and we don't know the answer at the moment. I think the, we would be advised to account that part of that change is actually due to climate change. Studies in Western Australia have shown that at least part of the reduction in rainfall over there has been due to climate change and it's quite possible that that would be the same here.

The difference with this drought is that it's also hotter and so we've not only seen low rainfall but high temperatures that's driven high evaporation which actually meant that the drought has been harder and deeper than the previous droughts.

QUENTIN MCDERMOTT (to Mark Howden): What has that meant for farmers?

DR MARK HOWDEN, INTERNATIONAL CLIMATE CHANGE EXPERT, CSIRO: It means that it's very hard to make a, get a crop and make a living.

QUENTIN MCDERMOTT: Recent industry forecasts paint a gloomy picture, suggesting that by 2030 agricultural output could fall by up to 10 per cent.

Agricultural economist Brian Fisher, though, is sceptical of this prediction.

BRIAN FISHER, AGRICULTURAL ECONOMIST, CRA INTERNATIONAL: Farmers are adapting continuously so we shouldn't assume that farmers just sit there and take this. Farmers are not going to sit there and take this basically. They're going to respond. And in the final analysis if it dries up so you can't plant an acre of wheat in the Mallee, then you either move to some other product or you move to some other part of the world where you can grow an acre of wheat if you want to be a wheat farmer.

QUENTIN MCDERMOTT: Adaptation is the key. That involves new technology and changing farming practices. And here, Ian McClelland is at the forefront.

IAN MCCLELLAND, CHAIRMAN, BIRCHIP CROPPING GROUP: This trial has been going for nearly 10 years, and it's comparing four different farming systems...

QUENTIN MCDERMOTT: On Ian McClelland's farm, trials are taking place to establish which of four different farming systems is the most viable and sustainable in the Mallee.

These include the "No Till" system.

IAN MCCLELLAND, CHAIRMAN, BIRCHIP CROPPING GROUP: ... in other words, no tractors, no sheep, no cultivation.

And the fourth one is what we call hungry sheep, which is using livestock to control weeds, but not really conserving moisture from one year to the next; you're really growing a crop or having sheep on every year.

QUENTIN MCDERMOTT: Ian McClelland uses data from his own soil tests to plan the coming season.

A computer model analyses data such as soil type, available moisture and levels of nitrogen present in the soil to forecast the likely yield in any given paddock.

But risk management tools like these will only pay off if it rains. Last year the odds went against the Mallee's farmers.

IAN MCCLELLAND, CHAIRMAN, BIRCHIP CROPPING GROUP: On this occasion I was encouraged to apply nitrogen, because the model told me I had a four in five chance of getting my investment back.

Unfortunately it was the last rain we had, virtually, for the year, and so it was the one in five chance which came home and so I lost money. But I knew the odds and that really helped me make the decision, and I feel as though it was the right decision, even though it was a failure.

QUENTIN MCDERMOTT: For Birchip's farmers, the key to managing the new season after last year's disappointment is to minimise production costs and get the right mix.

For the Ferriers, it means keeping livestock on the farm as a cushion against any failure of this year's harvest.

For the Smiths, it's about planning more conservatively than last year and taking even fewer risks with the crops they sow.

DAVID SMITH: We're sowing mainly cereals this year and probably very few, if any, legumes, maybe even no legumes at all. And that's being very conservative, yeah, but that's just what we've learnt from the past 10 years.

QUENTIN MCDERMOTT: In one area, Ian Smith and his wife Eileen have been less conservative in their spending.

The solar panels are up, which, even after a rebate, will leave them $30,000 out of pocket.

EILEEN SMITH: Over time, I think it will pay for itself and also we're doing some good for the community.

IAN SMITH: And people can go past on the highway here and see solar panels in, ask questions or whatever, and hopefully we can start some debate and get some more people to do it.

QUENTIN MCDERMOTT: The surprise now is that with minimal rain so far this year in the Mallee, some of Birchip's farmers are so bullish.

JOHN FERRIER: We're passionate farmers so we wouldn't be farming unless we were optimists. So, yes, I'm quite optimistic about the season. I think we've got a lot of things going in our favour. The recent bits and pieces we're picking up for the forecasts have certainly got a little bit of positive to them rather than negative, so, yes I'm hopeful for an average season or better.

QUENTIN MCDERMOTT: When "Four Corners" returned to Chris Rickard's farm, he too was in a buoyant mood.

CHRIS RICKARD: We've had two rain events since you were here at Christmas time and there's been a lot of rain up north and hopefully we're in for a reasonable year. If we can just get average rainfall we'll have a terrific year with the grain prices where they are.

QUENTIN MCDERMOTT: With the wheat price now hovering around $500 a tonne, Chris Rickard isn't ruling out forward selling his crops again.

CHRIS RICKARD: I think I told you when you were here in December that I wouldn't get involved in it again but you've got to keep reminding yourself that we're hedgers, not speculators, and we really should be locking something in for our coming harvest because when our harvest comes in at the end of the year, the price will be more than likely significantly less than it is at the moment. And we really should be locking them in but I only know of one person who has so far this year.

QUENTIN MCDERMOTT: For Don McAllister, last year's run of bad luck hasn't turned around quite yet.

When a storm broke over his farm last November he planted sorghum, a summer crop, in this paddock. He was hoping to use it to feed his lambs. But with little rain since then, it hasn't taken off.

DON MCALLISTER: The crab-hole sections are okay but the others are pretty ordinary on it. But I think in hindsight it was a good lesson for me in that if I was to do it again I'd probably prepare a bit more and I would sow in a lot heavier soil.

QUENTIN MCDERMOTT: Don McAllister and his wife Prue expect to borrow more from the banks just to make it through the coming season, eating even deeper into their equity.

DON MCALLISTER: We'll possibly run out of money about July, August, which means I'll possibly have to go to our financier, or the bank, and get some money to get us through 'til harvest. But hopefully we'll have a pretty good crop sort of bursting its way out of the paddocks by then and the pressure will be off to a degree.

QUENTIN MCDERMOTT (to Don McAllister): Hopefully.

DON MCALLISTER: Yeah.

QUENTIN MCDERMOTT: The McAllisters' total debt is now more than $800,000. This year they will again apply for exceptional circumstances funding.

DON MCALLISTER: Look I think, you know, you just get sick of borrowing, borrowing, borrowing. And, you know, just to have money like that, you know, look, it was just a relief.

PRUE MCALLISTER: I see the money as more a moral support. I mean as, you know, very much financial but also, yep, you know, hang in there a bit longer. Hopefully things will get better. And as Don says, when I say "Well how can we accept this money?" he says, "Well, they're going to get it in tax next year, hopefully."

QUENTIN MCDERMOTT: For years, the public's conscience has been pricked by stories of farmers going to the wall, being forced to leave their land, even suiciding. It's the bad news farmers themselves don't want to hear.

But a landmark survey of farmers commissioned by the Birchip Cropping Group found last year that "disbelief, despair and depression are widespread", that "virtually all families are questioning the value and possibility of staying in farming", and that "many farming families are now more vulnerable financially than ever".

The survey also uncovered divisions over exceptional circumstances funding.

ALEXANDRA GARTMANN, CEO, BIRCHIP CROPPING GROUP: There is a division as to whether or not that's propping up poor farmers versus that providing essential support during a time of really tough, tough conditions. So that's meant that essentially people are judging how people access the financial assistance and judging how they spend it, and that's been quite divisive in our communities.

QUENTIN MCDERMOTT: The year-long survey, called Critical Breaking Point, discovered that some farmers living with the drought had put off key decisions about their future.

The McAllisters were part of the survey.

DON MCALLISTER: I know when things go wrong you tend to blame your own management, you lose a lot of self-esteem, you lose confidence, you find it hard to make critical decisions and things like that. And after reading through that, you can understand that everyone was going through the same thing, and, gee, I'm only human.

ALEXANDRA GARTMANN, CEO, BIRCHIP CROPPING GROUP: We were trying to understand the impact of drought on farm families and whether or not it is a critical breaking point. Is a drought the key time when people decide to leave the land?

Interestingly the interviews have showed that high stress and pressure postpones decisions, so potentially drought does not actually create that critical breaking point. What it does is it drains the reserves and puts people in a diminished capacity to make more informed decisions.

(Excerpt from conversation between the McAllisters; parents watching children swimming in dam):

DON MCALLISTER: What's it like?

BOY: It's good...

GIRL: Really good...bit reedy though...

DON MCALLISTER: Yeah...

PRUE MCALLISTER: Yeah, it's called toxic green algae that you're swimming in.

(End of excerpt)

QUENTIN MCDERMOTT: More and more pressure now is being brought to bear on farmers to increase productivity or step aside. The calls are coming from government, economic leaders and corporate interests.

QUENTIN MCDERMOTT (to Don McAllister): You own a farm here which, for argument's sake, might be worth three or four million dollars, but with debts creeping up towards the million dollar mark, and you haven't really a made a proper profit for the last six or seven years, so where's the up side?

PRUE MCALLISTER: Ah, good question.

DON MCALLISTER: Well, the way I see it is the up side is that we've probably produced off this land, you know, enough food, fibre, meat etc to feed many, many, many hundreds of thousands of people.

QUENTIN MCDERMOTT: For the McAllisters planning their future is particularly difficult because their farm is also their home. It's the place where their children have lived and where they love to return.

And there's always the hope that the next good year is just around the corner.

PRUE MCALLISTER: You work hard and you put a lot of passion and sweat and tears into something and really you do wonder whether you wouldn't be better off just quitting.

The thing is, as I say, every year is a fresh year, and every year you think, you know, this is going to be it, this could be a really good year. And I guess it's something we enjoy doing, when it works. So we put it off another year, hmmm.

BRIAN FISHER, AGRICULTURAL ECONOMIST, CRA INTERNATIONAL: That's a typical approach of the eternal optimist that describes Australian farmers, basically. And, you know, sometimes it's time to call a halt and say, well, would I be better to sell up and try and do something else, or am I going to try and mortgage myself further and further into debt? And frankly, at some point you've just got to say no, it's time to get out.

QUENTIN MCDERMOTT: In the long term, some farmers may have to decide whether their land can still be farmed.

DR MARK HOWDEN, INTERNATIONAL CLIMATE CHANGE EXPERT, CSIRO: The real concern is that the frequency of drought will increase with climate change and so at some stage farmers may ask themselves the question of how many good years do I need to maintain a viable business. And at some stage they may not be getting enough good years to do what they're doing now.

QUENTIN MCDERMOTT (to Brian Fisher): Should the decision on what land is viable and what land is unviable be left up to the free market?

BRIAN FISHER, AGRICULTURAL ECONOMIST, CRA INTERNATIONAL: Yes, the answer to that is yes. We've seen plenty of examples over the last 100 years of Stalinist type planning in agriculture and they've all been complete failures.

(Excerpt from dinner conversation, Ferrier family with Ian McClelland and Mark Howden):

(Everyone making a toast): Here's to the season!
To the season!
Any good yields!
And $20 dollars a bushel!

(End of excerpt)

QUENTIN MCDERMOTT: For farmers like John Ferrier and Ian McClelland, there's no question of getting out, and CSIRO scientist Mark Howden recognises the strengths of their approach.

(Excerpt continued):

DR MARK HOWDEN, INTERNATIONAL CLIMATE CHANGE EXPERT, CSIRO: Climate change will actually make good management, it'll put a premium on good management, so good management will become more and more important as climate change happens.

(End of excerpt)

QUENTIN MCDERMOTT: Farmers like John Ferrier and Ian McClelland can see healthy profits coming from higher wheat prices - even in years with lower than average yields.

Corporate investors are also waiting in the wings, eager to take advantage of these record prices.

They include Glencore Grain, a subsidiary of the Swiss-based multinational Glencore, which is spending millions of dollars leasing farms and planting crops across Australia.

IAN MCCLELLAND, CHAIRMAN, BIRCHIP CROPPING GROUP (at dinner): These people in London have asked me to buy a farm for them, stockbrokers. And Glencore are suddenly wanting to lease, at least they say, a hundred thousand acres already, to grow crops, so there's a real change happening. The people that usually make the right decisions are now really being proactive in trying to get into this industry.

FRANK DELAHUNTY, AUSTRALIAN FARMS FUND: This is a map that we've drawn up from, reference from CSIRO. It's indicating where the climate change winners could be, and the climate change losers potentially could be. So rainfall - we're indicating areas in red are the preferred target zones from our point of view to take into account the impact of climate change in Australia.

QUENTIN MCDERMOTT: In 1996 entrepreneur Frank Delahunty established Direct Investment Rural Trusts, or DIRT, which managed the agricultural investment trust, Warakirri.

Warakirri has used superfunds to buy and aggregate 52 dryland cropping farms, and has managed them through the drought.

FRANK DELAHUNTY, AUSTRALIAN FARMS FUND: It gives the opportunity too for 52 farming families who were selling their farms, the children were not coming home, for a new capital provider into our community.

There's no doubt that there's a lot of consternation about the growing farm size, but DIRT and Warakirri didn't start that sort of game. All farmers, even in this region, are growing their farm size holdings.

QUENTIN MCDERMOTT: Frank Delahunty's aim now is to get super funds to invest a further $200 million in agriculture, under the banner of a new enterprise, Australian Farms Fund.

He argues that the strategy succeeded before and will do so again - even in times of drought.

FRANK DELAHUNTY, AUSTRALIAN FARMS FUND: It's not a great time to start a dryland farming operation, but we got our results up because we were diversified. We had some farmlands in Queensland, farmlands in New South Wales, farmland in Victoria. Some of them went good in the drought years, some of them went poor. Across the group we got a reasonable return.

QUENTIN MCDERMOTT: Family farms may have to follow suit if they are to survive climate change in the long term.

BRIAN FISHER, AGRICULTURAL ECONOMIST, CRA INTERNATIONAL: If you've got a farm in the Mallee, maybe you need a farm in Western Australia. Now most people are not going to be, that doesn't sound very practical frankly for most family farmers because they don't want to be traipsing from the Mallee to Esperance to do their farming. But if you've got a broader company structure for example, then you can afford to do that sort of thing.

QUENTIN MCDERMOTT: A decade of drought has left many of the next generation of farmers neither willing nor able to take up the challenge.

Hundreds of young men and women from around the Mallee converged on Birchip last month for a wild night out. It was the annual B&S Ball.

(On screen text: "Mallee Root Roundup, Birchip B&S Ball")

YOUNG WOMAN (at Burchip Mallee Root Roundup, B&S Ball): If you look around there's a lot of people here who actually aren't farmers. They've come from farms and they've either gone into becoming mechanics or boiler makers, that sort of thing, so they're actually moving away from the farm.

QUENTIN MCDERMOTT: Only a few will spend the rest of their lives on farms.

QUENTIN MCDERMOTT (to young man at Burchip Mallee Root Roundup, B&S Ball): Do you want to stay on the farm?

YOUNG MAN: I'd love to. Love to. I love the land.

QUENTIN MCDERMOTT (to young man): Is there any reason why you wouldn't?

YOUNG MAN: Ah no. No.

QUENTIN MCDERMOTT (to young man): What about the drought? What about climate change? What about all of that?

YOUNG MAN: No, I think we could all push through that. With more...

YOUNG MAN 2: Fundraising from the Government and that ...

YOUNG MAN: Not just that. It's the varieties that are coming out that are drought tolerant. And just yeah, everyone supporting each other. That's the main thing.

(Farm auction, auctioneer and bidders, buying and selling)

QUENTIN MCDERMOTT: The McNicol family have made the hard decision and sold up. Vince McNicol's sons, Danny and Eddie, won't return to spend their lives on the land.

Their farm stayed in the family for 98 years and three generations. But 11 years of drought brought an end to it.

DANIEL MCNICOL: We were chewing roughly a quarter of a million dollars into this property every year and the risk was too great. You can put up with one drought. Two can be kind of heartbreaking and then next thing you're half a million down. It's not a lifestyle, it's a business and if your business is either stagnant or it's losing money then something has to change.

QUENTIN MCDERMOTT: In the Ferrier family, an orderly succession plan is taking place. In two weeks' time Peter is handing over to his brother John's side of the family.

PETER FERRIER: I've had a very good time on the farm. It's been very good to us. We've brought up our families. It's just got to the stage, I'm just running out of enthusiasm and not having a boy or someone to drive you coming home has made it probably even a bit harder for me. I just want to have a few years in our lives with Sue and I together where we can go do something as one.

SUE FERRIER: I've spent 30 years nearly chasing a calendar actually and I'd just like to get a bit of a normal life for a while.

We were going to do it a few years ago but it didn't work out, so this is the year.

PETER FERRIER: We just feel, it's time for us now. Even though we're not old, I think we've got to make every opportunity a winner at the moment.

QUENTIN MCDERMOTT: Next month, Sue and Peter Ferrier will leave the farm and set off in their caravan on a trip to Queensland.

On the same farm, but on the other side of the family, David Ferrier can't wait to get back to work.

DAVID FERRIER: Look I'm really passionate about farming and I'm going to endeavour to be here as long as I can be. I mean, we don't know what the weather is going to do, the climate. But I'll be, with John and I are going to be doing our best and whatever we can to survive here and, yeah, I plan on being here forever.

(End of transcript)