Low prices to threaten Australia’s food production capacity?

Posted by Daniel Palmer on 12th October 2009

The price of fruit and vegetables must increase to ensure that Australia’s horticulture sector does not collapse, a leading NSW farmers’ representative has argued.

”You will see the demise of the horticultural industry because we cannot sustain these low prices,” Peter Darley, Chairman of the NSW Farmers’ Association horticultural committee, said, according to the Sydney Morning Herald. “They are below the cost of production. There are people leaving the industry because they cannot afford the low profitability.”

Middlemen and retailers were ”price gouging”, he alleged, with a lack of transparency ensuring that it was difficult to see where the profits were heading.

”Look at apples. They range from $1 to $1.80 [a kilogram] on the wholesale market. You may go to $2 for some premium fruit. That is what the grower is receiving. If the quality is down, it could be 60 cents a kilo,” Mr Darley said. ”The retailer is charging a minimum of $3.99 – and $7.99 in some areas.”

Australia’s dairy industry has also reported that the current price of milk is below that of operating costs for most farmers, meaning that losses incurred could see a mass exodus from the dairy sector.

Food security

The issue of food security is one of the world’s great problems and finding a balance for food prices is increasingly difficult. On the one hand, higher prices can increase production as they encourage more people to enter horticulture and agriculture sectors but, if prices rise, then it threatens the wellbeing of those already struggling to find the funds to pay for their daily necessities. On the other hand, lower prices are crucial to the world’s financially stricken countries but lead to many exiting the industry and creating difficulties in the long-term.

Added to this is the world’s growing population, which is limiting the amount of land suitable for food production and increasing the world’s food needs. Such issues have created fears that a food shortage is on the cards in decades ahead without intervention.

Indeed, it was only last year that such fears were being aired on a daily basis, with food prices soaring to record highs as a result.