In the food world, we can often predict what is going to happen in the future here by monitoring what is going on in the UK right now. Think about the growth of private label brands – it happened in the UK ten years ago; Australian supermarkets even imported key staff from UK retailers to replicate their programs here. It didn’t work there; and it won’t work here – but that’s a story for another day.
Recent research in the UK has shown that people are buying less Brussels sprouts, lettuce, leeks and cauliflower; and British farmers are producing fewer fruit and vegetable crops, tomatoes, cucumbers and spring onions. Food tastes are so changing and the economic relationship between farmers and the retailers they supply so out of kilter that farmers are looking to grow other crops, do other things.
In a report just released, Catalyst for Change, the National Farmers’ Union says Britain’s self-sufficiency in vegetable production fell from 73 per cent in 1998 to 60 per cent in 2010; and it is only 38 per cent self sufficient in fruit. Poor returns are driving fruit, vegetable and potato producers into more lucrative cereal production.
The report blames “poor supply chain practices and a short-term approach to relationships between growers, intermediaries and retailers” for removing the financial incentive for the growers to continue growing.
NFU deputy president and potato grower Meurig Raymond said: “This is not about growers versus retailers, but we have to bring an end to damaging activities or risk losing huge swathes of British horticultural production.
“Some retailers are making efforts to invest in the future of British farming, but our report shows that all too often this good work is being undone in pursuit of higher profits.
“Unless action is taken now we could see less home grown fruit and vegetables on supermarket shelves. This will mean more imported produce, less choice and ultimately higher food prices due to a lack of investment on farm.”
NFU horticulture and potatoes board chairman Sarah Dawson said: “British growers want to do business with retailers, yet the sector is being driven to its limits and is evidently not coping with the strain. Against a backdrop of higher costs, lower profits and a falling market share we desperately need to find better ways of doing business …”
Sound familiar?
Australian farmers are facing exactly the same pressures. They are being squeezed by a duopoly-dominated retail market, where the prices they receive often don’t cover the cost of production let alone provide them with a margin. Yet the mark-up at checkout still delivers high profits to the retailers and cheap prices to consumers. The Australian Bureau of Statistics tells us so.
The latest consumer price index gives us an annual inflation rate of 1.2 per cent, the lowest for 10 years. While there was a slight rise in the price of vegetables in this quarter, this is off the back of a massive drop in fruit and vegie prices over the past year. According to the ABS, the price of fruit and vegetables plunged nearly 22 per cent in 2011-12.
So who’s the bunny here? The farmer, at the bottom of the food chain, who is always the price taker.
Why?
This is a classic challenge of social marketing: positive attitudes do not necessary lead to a change of behaviours. People say they want to support local producers, and they say they buy Australian because that’s what they are expected to say. In many cases, consumers do not even realise that they are not walking their talk; and their actions don’t reflect their words. They buy cheap imported food because they generally don’t make the effort to understand where it comes from. A case in point: the average shopper doesn’t have a clue that that most white garlic comes from China and has been bleached; and finding fabulous Tassie grown garlic takes a lot of effort.
I like to think that most Australians are fair-minded and not totally driven by price; that they expect to buy food that, by default, is grown in Australia where possible and at a price through the supply chain that allows the producer to make a living. No sensible person really believes that food prices can continue to fall when everything else goes up in price. Like everyone else, farmers’ input costs are continually rising – but farmers have no way of passing these increases on. If they really stop and think about it, most people realise that $1/litre milk is unsustainable; and that the end result of a ‘down, down, down’ type strategy will be to drive Aussie farmers out of business. Both major retailers announced their half year results last week – and, surprise surprise, both reported increased profits.
Retailers and processors say that they want to support Aussie farmers – it is now even a key theme in marketing programs. They say that they only import fresh produce when Australian products are unavailable. But what does ‘unavailable’ actually mean? Generally, it doesn’t mean that there is no Australian product in the marketplace. In normal times, we can grow pretty much everything somewhere in Australia, pretty much all year round. More often, it means that the retailers and processors are not willing to pay a price that allows farmers to cover costs of production or – heaven forbid – even make a profit.
Imports of fruit and vegetables have doubled in the last decade and now make up more than 20% of what we consume. Australian farmers are being driven out of business as we speak. In the last few months, at least three major mainland fresh produce growers have been placed into receivership – and that’s just the big ones that make the news. Many smaller growers just shut up shop with no fanfare, as their farms become uneconomic.
The British report makes a number of recommendations for change, including:
• long term supply contracts to inject stability into the supply chain;
• greater price certainty for growers through price formulae, market trackers and fixed prices agreed in advance for a specified volume of crop or for the season; and
• supermarket promotions linked to actual production.
We should take note. It is already happening here.
