Mystery of profit flow for fresh fruit & veg

5th August 2021 | Eativity editors

Australian shoppers may have noticed a steep price hike on some of their favourite fresh fruit and vegetables over recent months, but according to the NSW Farmers Association, profits from higher retail prices on fruit and veg are not reaching farmers.

The cost of vegetables inflated by 5.5 percent in the June quarter, while the consumer price index (which measures the average change of prices paid by households for goods and services over time) on fruit lifted by 4.7 percent. Chair of the NSW Farmers Horticulture Committee Guy Gaeta says the noticeable price hikes at the retail level are creating mystery around where the profits are going, because it’s not going to farmers.

“Farmers are not reporting changes to their payment from wholesalers, driving speculation that the more powerful elements of the supply chain, including major retailers and wholesalers, are pocketing the profit,” Gaeta says.

“Lebanese cucumbers, for example, are selling for up to $11.90 per kilogram in the supermarkets, while growers are currently receiving around $5 per kilogram, equating to a 140 percent mark up on the farmgate price. Red Delicious apples are selling for $3.90 per kilogram, while they’re going for $0.83 per kilogram at the farm gate.”

Lebanese cucumbers are currently selling for $10.90 a kilogram at Coles.

Supply chain power inequities are a known challenge for many fresh food farmers, who are price-takers rather than price-makers due to the perishability of their product.

“A number of state and federal inquiries have confirmed that farmers in fresh food supply chains such as horticulture, dairy and poultry meat bear the brunt of distorted power dynamics that favour the bigger players,” Gaeta says.

“We know a lot of people are doing it tough right now, and our heart goes out to the restaurants and small businesses that are suffering. But the major retailers and wholesalers aren’t struggling right now, and it’s irksome to think they might be capitalising from rising demand for food with the closure of other providers such as fresh food markets.”

Unlike many other businesses, major supermarkets have thrived during the COVID pandemic.

Gaeta says the price hikes are likely attributable to a number of factors, including significant shortages in labour supply caused by ongoing border restrictions amid COVID-19.

“There are a number of complexities behind the inflation of essential goods, and we don’t want to speculate too much on these. What we do know is that farmers are not seeing a fair distribution of profit for their produce,” Gaeta says. “We need to see the Horticulture Code of Conduct strengthened to increase market price transparency.

“Growers are at the coalface of a number of challenges at the moment. Many growers are in a position where they need to recoup their losses, and it’s heartbreaking for them to see someone else pocket the increased profit for their produce.”