Australian farmers are facing ever-increasing 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 consumer price index showed an annual inflation rate of 2.2 per cent for calendar 2013. According to the ABS, the overall food inflation factor for the same period was 2.1 per cent. If you unpack that data, the performance of some individual food sectors is frightening – for example, overall, the price of vegetables plunged 10.7 per cent.
It is not rocket science to work out that it is simply not possible for farm businesses to continue to absorb increasing input costs while at the same time receiving lower returns for their products.
So what is going on here?
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.
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.
Future Directions International, an independent strategic analyst, released a report last week that confirms what farmers’ groups like TFGA has been saying for years.
According to the report, Australia’s long-term food security depends on maintaining diversification of both producers and produce. Government mechanisms must be adopted to ensure that retailer behaviour does not impinge on the balance of power between buyers and sellers of Australian food. Further growth of the major retailers, left unrestrained, has the potential to destabilise Australia’s food system, to the detriment of the food security enjoyed by Australians today.
So who’s the bunny here?
No surprises: it is the farmer, at the bottom of the food chain, who is always the price taker. However, eventually, if we don’t do something to address these serious and systemic dysfunctions, it will be Australian consumers. That’s right – you and me.
TFGA chief executive Jan Davis
