November 2011
Australians love fresh food and we have some of the best quality food in the world available to us, but are we running the risk of jeopardising this by constantly seeking the lowest price and not being prepared to pay for this quality?
Every day I have the Queensland Country Life newspaper and the Beef Central website news delivered to my email inbox.
In the last week there have been five articles on price wars and their effect on the profitability and viability of Australian producers.
The best example we have seen is milk and if you do an internet search on it, you can see the debate has been raging since January. According to the latest newspaper article, milk producers in QLD, northern NSW and WA will be the hardest hit.
In the far north of Queensland where I live, we once had 200-300 dairy farms.
That number is now at around 60 and reducing at an alarming rate. This is due mainly to the cost price squeeze being felt by producers in a challenging climate region for dairying, which requires higher feed inputs, has lower outputs than southern regions and therefore increases costs against production.
In Kangaroo Valley where there were once 64 dairy producers, there are now 6 and they too are facing profit losses due to the decrease in milk price as a result of the pricing war. While producers may average around 48c a litre for their milk, the fixing of pricing at $1 per litre (which incidentally was the price 20 years ago in 1992) means that as input costs increase, there is no room for the manufacturer to compensate producers, as they have already taken their operating margin to its lowest point, and in some cases are operating in the negative.
It seems though that it doesn’t stop at milk.
The latest campaigns have targeted beef and lamb, bread and some vegetables are being set priced for 12 months in most states.
While these cuts are not being transferred to producers at the beginning, it can have effects in the future as they don’t allow for inflation or increasing input costs to be taken into consideration and factored into pricing.
There has been a push for supermarkets to show what price they pay for fruit and vegetables on the pricing label, as it has been suggested that some vegetables they purchase for 30c/kilogram, they sell for $3/kilogram, with little input costs in the middle as generally producers pack the product and supermarkets simply transport them as is.
So what is the worst case scenario?
We have already seen imports of prawns from Asian countries impact the Australian prawn industry, there is the potential for northern regions to be drinking only UHT milk and we know that imports of beef could potentially bring in diseases that we have both spent money to eradicate or don’t yet have in this country. Without a profit a business can’t survive and we will need to import our food from countries that cannot provide both the safety and quality of product that we expect every day.
It is not wrong to want to save our own money and find the best priced produce, but often we don’t realise that this could be the one thing that causes Australia to become a food importer when we have ample land, technology and expertise to produce our own food and feed other countries of the world.
We expect that we be remunerated at an appropriate level in our jobs to account for the cost of living so why should producers expect any different?
The argument for raising the profile of producers and celebrating the contribution they make to our society and the economics of our country is gaining momentum.
While I had pricing wars in the inbox last week, I also had a more positive email - the official launch of the Australian Year of the Farmer in 2012 at Farm Cove, Sydney (now the Botanical Gardens), with the slogan “Our Farmers, Our Future”.
There are many details yet to come but if you are interested in seeing what they are planning, take a look at www.yearofthefarmer.com.au.
And remember to… thank a farmer for your next meal! Kiri Broad