Potato farmers in the Ballarat region are demanding a pay rise for their produce, claiming McCain Foods does not pay a fair price for the popular mealtime vegetable.
Key points:
Ballarat potato farmers want 59 cents per kilo for their produce from McCain Foods
The current rate is just 33 cents per kilo
Farmers say it costs 51 cents to produce a kilo of spuds
Last season McCain Foods paid growers an average of 33 cents per kilo of potatoes delivered to the local processing plant, a figure that farmers said was well below the rising cost of production.
A farmer, who asked to remain anonymous, said the local growers’ association had approached the processor on Monday asking for 59 cents per kilo, a 78 per cent price increase.
The requested price rise reflected the current cost of production and rising input costs, such as increased fertilizer and fuel prices, and also allowed the farmers to turn a profit.
The farmer said eleven factors such as weed and pest control, irrigation, harvest, labor and transport were considered it cost approximately 51 cents to produce a kilo of spuds leaving producers running at a loss.
In January, storms also damaged a large portion of this year’s crop, which meant some farmers lost more than a third of their yield and reduced the Ballarat region’s potato harvest by 20 per cent.
McCain Foods’s processing plant in Ballarat turns out potato chips for supermarkets and fast food chains.(Rural ABC: Jane McNaughton)
McCain Foods has previously been investigated by the Australian Competition and Consumer Commission (ACCC) over allegations of unconscionable conduct towards growers.
A McCain Foods spokesperson said the company engaged in constant dialogue with growers throughout the course of the year.
“We cannot provide details on our confidential pricing discussions with them,” the spokesperson said.
“We are proud of the continued investment we have demonstrated in recent years and will continue to support our customers, our people, our growers, and the hundreds of people within our communities who depend on us for their livelihoods.”
In Tasmania, farmers have recently rejected price offers made by food manufacturers Simplot for their potato crop this season.
Lettuces have crossed the $10 mark, milk prices are being bumped up by the major supermarkets and strawberries are $6 a punnet.
Nearly everywhere you look, the price of food and other farmed goods is on the rise.
You would be forgiven for thinking this must be a great time for Australian farmers, preferably while gazing out the window at gentle rain.
Not remove.
Prices on the rise
Understanding what’s driving the price of any commodity can be a mind-bending exercise at the best of times.
The current situation is broadly due to a number of issues, the first of which has to do with the nature of the Australian growing season.
Australian vegetables come from different parts of the country depending on season. At the moment the primary supplier is Queensland.
Earlier this year some of its growing regions were smashed by two floods in 11 weeks.
Queensland’s Lockyer Valley flooded earlier this year and destroyed large vegetable crops.(Supplied: Lockyer Valley Regional Council)
Belinda Frentz is a herb grower on the state’s Gold Coast and deputy chair of Australia’s peak body representing vegetable growers, AUSVEG.
She said the damage to crops caused already high prices to climb even further.
“When you get a loss of that magnitude, it’s not the price that’s significant, it’s the production loss that’s associated with that,” Ms Frentz said.
“Anything that increases in price is usually associated with a loss somewhere in the supply chain.
“When we’re processing less than half of the volumes that we usually would, obviously the demand for that product increases exponentially and there’s just not the availability of the products.”
Farmers with hidden costs
Like every industry, farming has costs. There are start-up costs, such as the price of crop seed for the year, the cost of land, or the price of buying livestock.
Then there are input costs, things like fertilizer, fuel, chemicals, water and labour.
In short, they are the products necessary to do business — similar to fixed costs for personal budgets, such as rent and electricity.
These costs fluctuate naturally, but recent world events have thrown a spanner into the works.
Common fertilizer, urea, jumped from $750 a tonne in 2021 to $1,300 in 2022.(Rural ABC: Clint Jasper)
Fertilizer costs began to spike in mid-2021 when China announced restrictions on exports, but the war in Ukraine has driven that price even higher.
The price of fuel has also been abnormally high, particularly for diesel, which is not just used in tractors, but also fuels the trucks that haul produce from the farm to processors, wholesalers and supermarkets.
The ongoing global hangover from the pandemic has also slowed Australian imports of these commodities to a crawl.
Creating a perfect storm
While each of these costs may have been manageable on their own, together they have created a perfect storm.
Ms Frentz said the costs were eating into what little profits many producers were making.
“We all know what our costs of production are and we know that they’ve increased,” she said.
Belinda Frentz says flood damage to crops caused already high prices to climb further.(Supplied: Belinda Frentz)
“I think the new pricing of fresh [food] will be around the input pressure costs that we’ve got, and that we can’t do anything about.
“Like everybody at the moment under household pressures about the cost of living, growers are experiencing that across the board.
“For us to be sustainable, we have to be profitable.”
A tale of two growers
But with prices so high, how much of that money is actually making it back into the pockets of growers?
Melbourne-based wholesaler Michael Piccolo believed the situation had divided growers into two distinct groups.
“You’ll get a certain grower that doesn’t have the yield, so basically whatever they’re producing is only covering the cost of production,” Mr Piccolo said.
“Then you’ll have a grower who has a full crop and they just base their sales on what’s going on around the Australian market.
Melbourne vegetable wholesaler Michael Piccolo believes the market is over inflated.(Supplied: Michael Piccolo)
“Certain markets like Melbourne, Brisbane and Sydney will compete against each other, so when one sets a price, everyone else has to follow suit.”
Mr Piccolo also believes that, while input costs are a large part of current costs, it is competitive bidding from buyers that is driving up prices.
“I think it’s a contributing factor. My opinion, though, is that it’s a bit too inflated and we’re about 20-30 per cent above where we really need to be.”
When will prices come down?
The good news is that relief is on the horizon.
Mr Piccolo believes prices will fall as the season shifts away from Queensland growers and back towards those in southern Australia.
“The changeover of seasons happens around September to October, so a lot of these products that we have to purchase from Queensland start to come down during the Victorian season,” he said.
“My prediction is that we’ll start to see prices reduce more towards the mid-to-end of September, and then the Victorian growing season will kick in.
“However, I can’t see it making it’s way back down to the prices we’ve gotten used to,
“I think it will probably settle around at 10 to 20 per cent above what we are traditionally used to pay.”
