Mystery profits for fresh fruit & vegies

5th August 2021 | Eativity editors

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

The cost of vegetables inflated by 5.5 percent in the June quarter. 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 they’re not going to farmers.

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

“For example, Lebanese cucumbers are selling for up to $11.90 per kilogram in the supermarkets. Growers are currently receiving around $5 per kilogram. This equates to a 140 percent mark-up on the farmgate price. Red Delicious apples are selling for $3.90 per kilogram [in stores]. But they’re going for $0.83 per kilogram at the farmgate.”

Fresh fruit and vegies are selling at record high prices
Lebanese cucumbers are currently selling for $10.90 a kilogram at Coles.

An uneven playing field

Supply chain power inequities are a known challenge for many fresh food farmers. Our growers 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. 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.”

Fresh fruit and vegies
Unlike many other businesses, major supermarkets have thrived during the COVID pandemic.

A need for price transparency

Gaeta says the price hikes are likely attributable to a number of factors. These include significant shortages in labour supply caused by ongoing COVID border restrictions.

“There are a number of complexities behind the inflation of essential goods,” Gaeta says. “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. 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. It’s heartbreaking for them to see someone else pocket the increased profit for their produce.”