Growers weigh into food price debate

Posted by Isobel Drake on 11th November 2009

Horticulture body Growcom entered the simmering debate about rising Australian grocery prices today, arguing that families who wished to reduce their food bills should switch to a greater consumption of fruit and vegetables in their diet and questioning the pricing mechanisms used by retailers.

Chief Advocate Rachel Mackenzie said that Australian Bureau of Statistics’ Cost Price Index figures had shown that in the September quarter 2009 prices had fallen in the quarter by 5.6 per cent for vegetables and 5.4 per cent for fruit, due to peak growing seasons and favourable weather. By contrast, the greatest price rises had come from take away and fast foods (up 0.8 per cent), food additives, condiments and poultry (up 1.4 per cent).

“ABS figures showed that for the 12 months to the September quarter 2009, the 2.5 per cent rise in food prices were mainly driven by price rises in take away and fast foods (up 5.1 per cent), restaurant meals (up 3.2 per cent), snacks and confectionery (up 4.2 per cent) and soft drinks, waters and juices (up 3.9 per cent),” she noted. “Vegetables and fruit recorded the most significant drop in prices dropping 3.8 per cent and 2.6 per cent respectively for the year.”

However, Ms Mackenzie said that from a producer’s perspective these figures were disturbing since they did nothing to illuminate the gap between what the consumer paid and the producer’s returns.

“Recent reports have showed that returns to growers have been declining,” she advised. “Australian Bureau of Agricultural and Resource Economics’ figures showed that adverse seasonal conditions in many vegetable growing regions in 2007-08 had led to a decline of farm cash incomes to vegetable farms by 3 per cent.”

“At the same time Food and Grocery Council figures show that Australia’s largest food imports by value are processed fruit and vegetables which have been increasing steadily in the past five years and were valued at $1.7 billion in 2008/2009.”

Ms Mackenzie believes the Australian Competition and Consumer Commission’s grocery inquiry last year failed to effectively investigate the supply chain in regard to the farmgate and was unable to shed light on the pricing mechanisms used by retailers to set food prices.

“Clearly, farmers in recent years have not only had to bear the costs of drought but also increasing cost of inputs such as fertiliser, fuel, labour and freight in their own production systems,” she said. “But to what extent they are also contributing to the maintenance of the profits of Coles and Woolworths through a continual downward price pressure at the detriment of the sustainability of a local industry long term is unknown and the investigative might of the ACCC was unable to bring it to the light of day.”

Ms Mackenzie added that, despite the failure of the Federal Government’s Grocery Choice web site, the degree of choice consumers would have in future about where they buy their groceries would be greater following an agreement between the ACCC and Coles and Woolworths in regard to restrictive leases.

“Clearly, this benefits not only consumers but producers who will have more opportunities to market their produce,” she said.

“Clearly a vibrant competitive grocery retailing market allowing the introduction of new grocery retailing concepts such as Costco and the survival of independent supermarket operators such as IGA and ALDI and smaller retailers such as greengrocers alongside the two major supermarket chains – Coles and Woolworths – is of vital importance to consumers who have the chance to secure lower prices and greater choice,” Ms Mackenzie continued. “It is equally important to horticultural producers who then have a wider range of options for marketing their produce at a price which will secure the sustainability of their operations and a local industry as a whole.”