Frustration not fear keep farmers mum on retail wars
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Earlier this week Rod Sims, chairman of the Australian Competition and Consumer Commission, offered protection to whistleblower farmers and grocery supplies if they spoke to the ACCC about long-alleged price gouging by Australia’s supermarket duopoly. “Some of the behaviour that supplier organisations and others have alleged, if true, would amount to unconscionable conduct,” said Sims. ”We’ve been urging suppliers to give us some evidence to take things forward [in a prosecution], but we’ve been having trouble getting that. Too many of them are scared. At the moment all we’ve got is third-party hearsay.” But for West Australian vegetable grower Greg Norton, who sells his vegetables to a wholesaler that supplies Coles and Woolworths, it’s not fear keeping farmers from talking. “It’s not the fact that we’re frightened. It’s that the ACCC isn’t powerful,” said Norton. Lynne Strong, sustainability and marketing manager at NSW’s Clover Hill Dairies, agreed: “The ACCC is a toothless tiger.” Clover Hill Dairies won the 2010 National Landcare Woolworths award for Primary Producer of the Year. It supplies its milk to Lion and Parmalat, which then sells the milk as supermarket label product in Coles and Woolies respectively. Clover Hill’s product ends up in the $1 a litre Coles v Woolworths milk wars. Watching the milk they work hard to produce sell for just $1 a litre is heartbreaking, Strong told Crikey: “It devalues your product. It devalues what you do totally to think that your milk is worth less than water. “It may be a short-term strategy, they may even believe it themselves in the short term. It’s so simplistic, it has to pass on to farmers, the supply chain cannot continue to absorb it.” The battle for low prices is just a race to the bottom. “What Coles is doing horrifies me,” said Strong. “When you stand up in the public forum and say ‘I will match price’ then Woolworths becomes Julia Gillard if it doesn’t do it.” But despite the frustrations, arguing to the ACCC is pointless, says Strong. She fronted last year’s Senate inquiry into milk prices and has put submissions to the ACCC regarding food labelling. “While they give the impression that they want to help, you’re just chasing your tail, nothing happens. It’s a waste of time,” said Strong. “This is where the government needs to step up to the plate and empower the ACCC to be in the space that they need to be in.” Norton agrees the result of the Senate inquiry into milk prices — which found consumers were winning from the supermarket price war and that dairy farmers hadn’t been that badly affected — make farmers question why they’d bother. “This instance [the latest supermarket battle over fruit and vegetable prices] doesn’t seem to be any different from what the dairy industry was,” he said. “So the ACCC findings aren’t going to be any different and no one was really happy with that — producers or the industry.” Strong also cites the high cost of putting a submission to the ACCC. The first time she submitted a response she hired a private consultant and spent $40,000 of her own money. “We do not have the skill sets to actually know exactly how to pitch to the ACCC and get results,” she told Crikey. The ACCC assured Crikey farmers and grocery suppliers do not have to make a formal submission; a simple phone call or email will get the ball rolling for the ACCC to follow up complaints. But farmers need legislation not inquiries, according to Norton: “To make changes it has to be policy changes at government level, whether that’s setting prices or quota systems.” For Strong, working collaboratively with customers is the key to successful farming. “I certainly don’t want to take on the supermarkets, they are a valuable supply chain partner,” she said. “We should be working collaboratively with supermarkets. And that’s what I want to do, I want to go out there and build two-way conversations.” |
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11 Comments
What a depressing situation that producers have basically lost hope and faith in the system.
It would be worthwhile having a follow-up piece on exactly how the ACCC might be improved.
Its called the “Australian Competition and Consumer Commission”
The milk war favours consumers through lower retail prices and it is an example of increased competition amongst the retailers. That is why the ACCC is not concerned. Quality capitalism in action.
Squeezing the milk processors margins (which is what Coles and Wollies are really doing) is not the same as squeezing the farmers. In fact, according to Dairy Australia, the average return on equity of a dairy farm in Victoria over 2010-2011 was +12%, hardly dire straits. The top 25% of victorian farms make +26% returns on equity.
To me, this appears to be self interest commentary from primary producers who want to increase prices to increase their own profits. Should be ignored.
Scott - would there be the same interest if it were any type of supplier other than a farmer? I’m sick of farmers being seen as a special case.
Quality capitalism in action///Scott/// yes well this is just one instance where quantity over quality capitalism might provide a better outcome. More than two chains controlling the majority of the market.
I recall my flabbergastion, during an earlier farm gate price crisis in the 80s, that it was seriously claimed that farmers’ families were going hungry. FFS!
If true, they were in the wrong job.
@Scott & Malcolm
You state that the top 25% of Vic make 26% on their returns but the farmers overall make 12% what about the ones on a smaller margin than 12% as you so conveniently averaged the equation out. Do you consider this a fair return on an industry that could be destroyed in a few bad years of drought or floods???
Question 1: What do Coles & Woolies make on their investment, do you think it
might be slightly higher than 12% & what risk do they run from
to season to season. After all if food is scarce they simply inflate their
prices but still pay the farmers ZILCH, who does all the work & who
takes all the risks????
Question 2: In Europe their are several supermarket chains. In Australia there’s
only two major players & given what is happening to farmers & small fruit & veg retailers, most people would regard that as “Collusion not Competition”
what planet are you on???
Question 3: What price do you place on food security or quality of produce or do you not see that these farmers are deliberately being sent to the wall so that Coles & Woolies other buddy Monsanto can export all of their “POISONED GM CROPS” into this country instead of some of them.
Well I can tell you I do not want wholesale Monsanto crap on mine or my families plate, I am guessing you are an “Exec or such” for one one of these retailers or associated enterprises. The thing is you too will get cancer from eating their crap!!
As far as your subterfuge is concerned it doesnt fool many mate so you better try a bit harder!!!
When governments are there to bide the whims of the big boys, it is inevitable that many suffer.
We now have the 3 biggest mining magnates, all bull-necked sociopaths, ruling with iron Stalin fists.
They just about now own Australia and resent paying a fair tax that would give us some crumbs towards a more equitable society.
Some quality Capitalism!
Where is the quality care for the aged, the mentally ill, the homeless. Try and look at this ‘quality’ strolling around Hyde Park at 6am, where almost every seat is occupied by the homeless and the lost detritus of neglect.
Those three; collectively own $ 30.000.000.000 or is it $40 billion?
@Owen Gary
Firstly - An average of 12% return for a commodity that is basically the same the world over is excellent! Economic theory dictates that a commodity should basically return no economic profit.
Secondly- If you look at the distribution of returns using the 74 farm sample, you mave a mean (or middle) return of 7.4% with only 12% of farms recording a negative return.
Thirdly - Coles and Woolworths do control a large percentage of the retail grocery market. But there are quite a few mid-tier players (Franklins, Aldi, Harris Farms etc) that also add competitive price pressures to the big players and ensure a relative playing field. The fact that Coles and Woolies are going head to head in a price war is proof that competition is working fine.
Fouthly - No issue with Food Security. Dairy farmers in Australia already produce more dairy than Australians consume (we export around 46% of production)
Fifthly - While milk prices are under pressure, prices for other dairy products (cheese, yogart etc) have been increasing. Lets not forget that cheese is actually the golden product in the dairy universe (around 33% of production) vs 25% for milk.
Lastly - Not an exec for Coles or Wollies, but I do have an interest in commodity prices and futures
AS for GM - totally separate issue, but like Norman Borlaug, I am a fan. It will be the way the world feeds itself in the future.
For point 2 of my previous comment (in moderation) - It is the median value, not mean, that is 7.4%
@Scott
“Economic theory dictates that a commodity should basically return no economic profit”
Could you please enlighten me with the above statement!!!
Is this the business model these megalithic food retailers follow or anyone for that matter, as far as I was aware “Its a fundemental of capitalism”
As far as Woolies & Coles being rather large:- Australia has one of the most concentrated grocery markets in the world. Woolworhts & Wesfarmers (owner of Coles) account for 80% of all grocery sales, 60% of all alcohol retail, 50% of petrol retail, & 40% of ALL retail in Australia.
The more market share they have, the more influence they have over suppliers, and the easier it is to stamp out SMALLER independent retailers. You see Scot Woolies & Coles are basically sister & brother.
“While milk prices are under pressure, prices for other dairy products (cheese, yogart etc) have been increasing. Lets not forget that cheese is actually the golden product in the dairy universe (around 33% of production) vs 25% for milk”
“Yet another pearl of wisdom”, nearly all primary producers of milk produce just that MILK, they do not get money for cheese & yogurt etc which is processed by other interests, do you understand this concept.
As for the GM food, “newsflash” GM was released on the market in 1980 to feed the world, its real goal was to control the worlds food supply. Roundup ready crops are already being overun by resistant weed strains, which is great cause no one except you, Norman & a few other wack jobs want it. It is still not feeding people in the third world either.
However this is where your “Economic Theory” would work if Monsanto were to give the food away to these starving people.
I wish you the best with your speculation in stocks & commodities, but do you actually make any money using your “Economic Theory”???
I’m a casual reader about the farm sector so……it’s not the competition between Coles and Woolworths that’s at centre here,isn’t it that to offer lower prices and be competitive the two chains screw down the returns of the guys actually getting their hands dirty? Yes I did read that’s not happening in dairy,yet.