In Australia we are told that we are going to become the food bowl of Asia and food and is going to become a precious resource in the future.
I have little doubt that food is going to become harder to come across in the future as the world population increases whilst the same time we are not expanding the earth land mass. We also have those in society who want us to farm what we have harder and not convert land to agriculture.
However when the crunch comes we may find that processors and producers are simply not there to take advantage of any food shortage. The fact is we are simply starving our producers off the land at the same time our processing sector may have found it’s too costly for manufacturing in Australia. We have already seen a glimpse of this in recent weeks with Fords announcing it is closing and Holden talking about production costs.
The veggie industry is in real trouble in Tasmania, whilst in the Goulburn Valley producers are bull-dozing and burning 750 thousands trees, which come in the wake of SPC decision to slash its fruit intake by half, and of course it would put 1500 people out of work. The reason is cheap imports that are flooding into Australia.
Beef is another commodity where beef prices have not met the cost of production in the past, this has been compounded by the Governments appalling handling of the Indonesian crisis.
There are many reasons why Agriculture struggles to be competitive in Australia. For example for a 40 foot container to be shipped from Brisbane to Japan it costs $3700, whilst the same container from the West coast of America to Japan cost $2300.
According to Swift it costs 2.4 times as much to process a beast in Australia as it does in the US and in Brazil where it is three times cheaper than in Australia. A skilled boner in Australia would cost $30 per hour, and with on costs this would total $43 per hour, the equivalent rate in the US is $18 per hour. Electricity, gas and water are twice the cost in Australia when compared to USA.
Meat and Livestock Australia says customers are telling processors that they require carcasses and they will value add as it is so much cheaper in their own country. One processor I speak to told me his wage bill had gone up by 4% every year over the last four years and things like super, insurance compounding is it cost him 18% more for wages over the last four years. He can’t afford to absorb these costs and they are passed back to the producers who are simply price takers. There are those who think that it is okay, but the time will come when the producers will not produce any more beef, then the consumers will eat imported beef and the processors will close down
One producer was recently quoted saying a profitable cattle industry could not be sustained at present prices paid for cattle. He went on to quote where in the US a 300 kg beast returned $900 whilst in Australia the producer was receiving about $530. Perhaps it is worth remembering without producers the whole industry will collapse.
This includes veggies, meat and fruit whatever commodity, the point is if you kill the goose that laid the golden egg it is all over. I think most would agree that if there is not a profitable supply chain then the whole thing will collapse.
For their part the politicians and the ACCC go out to investigate and come back with truly earthshattering statements. ACCC say producers get 53% of the retail dollar on meat on the other hand we have a parliamentary committee calling itself a rural committee coming out and saying the producer gets between half and two thirds of the retail dollar. Surely even Dick Adams who chairs this committee can see through this, or can he?.,
A major problem seems to me to be the supermarket duopoly with its vast resources they have the most creative spin doctors who leave no stone unturned to give false impression of what actually is happening.
Are producers let down by those who are meant to be fighting on their behalf, In the case of meat we pay a five dollar levy for MLA to look after producer’s interests in R&D and marketing?
Recently I read a wonderful piece which quotes the MLA saying the cost of production of chicken had reduced whilst the cost of producing beef had gone up. They went on show a graph that had beef retail price at less than two dollars a kilogram in 1970 and chicken was about the same price, poultry has risen to about five dollars a kilogram whilst beef has gone up to $15.59 a kilogram due to the cost of production? (According to the MLA)
This means simply since 1970 that the retail price of beef has gone up by 8.3 times whilst the price producer has receives has gone up by 2.5 times so my opinion is that the producer share of the retail dollar has gone down. Surely the cost of production has very little to do with the present price of beef. If producers continue to get screwed then the outcome will be inevitable and the whole economy will suffer the consequences of stupidity.
Just a quick reminder that the ABA will be holding a forum at the Roma Showgrounds on Wednesday, July 10th. This is not just a talk-fest or a beat-up! Our intention is to find pathways forward. We must remember that a problem defined is half the solution.
Anyone wanting to see the agenda may view at this webpage. Roma Agenda