Should growers care about the "farm to retail margin"? Should regulators or lawmakers try to compel retailers to disclose their margin and markup on individual fresh produce items?
Digging deeper, is a low margin at retail a good thing for a fresh produce commodity? I've seen press reports of dairy farmers in Australia complaining that razor thin retail margins and price wars over milk have cost producers dearly. On the other hand, other growers may feel cheated if the farm to retail spread on their commodity is so large as to suggest their commodity is subsidizing the low prices of other items - i.e., a retailer could seemingly jack up the price of apples to push bananas out the door below cost.
This issue has reared its decidedly adversarial head in Australia, and I see the that PMA Australia - New Zealand has come out decisively against legislation that would require supermarkets to disclose mark-ups on fresh produce.
From the PMA A-NZ release
PMA Australia-New Zealand (PMA A-NZ), the leading fresh produce and floral industries’ trade association in the Australasian region, has rejected calls by Independent Senator Nick Xenophon and Federal MP Bob Katter for Parliament to support a bill that would require big supermarkets to disclose mark-ups on fresh produce.
Michael Worthington, CEO of PMA A-NZ today spoke out against the move, stating that this proposal would be almost impossible to implement.
“It takes no account of the fact that the major supermarkets buy some of their produce from wholesalers, so who would then be responsible for determining what the wholesaler has paid the grower? More often than not, produce is consolidated, graded, packed or processed by an intermediary who is sourcing from multiple growers – again, it would be nigh-on-impossible for there to be a clear chain of transactions to determine what was paid to the grower. And finally, fruit and vegetable prices change almost daily depending on supply and demand, so the task of monitoring and updating prices would be monumental” he said.
Mr Worthington added: “PMA A-NZ cannot understand what will be gained from this proposed bill; if the major supermarkets were making such massive profits at the expense of growers, then it would not take long before all the smaller independents were under-cutting them and we are not seeing any evidence of that. It is a competitive retail market out there for fruit and vegetables.”
“If growers do want to get a higher proportion of what consumers are prepared to pay, then they will have to avoid all the supply chain costs incurred in selling product through a retailer and instead sell at a Farmers’ Market. Making the major supermarkets implement a costly and unworkable system will achieve absolutely nothing for fresh produce growers and will be about as effective as the failed Grocery Watch scheme brought in by the Labor government,” he said.
PMA A-NZ believes that getting government support for its campaign to boost consumption of fresh produce would be a much more worthwhile initiative to benefit growers. “Supporting initiatives to increase the consumption of these healthy products to overcome the increasing rates of obesity and heart disease would be in the best interests of consumers and growers alike”, said Mr. Worthington.
TK: I applaud PMA A-NZ for taking a decisive and well reasoned stand. Yet sometimes you jsut can't fight the farm. Here is recent coverage from the Sydney Morning Herald revealed continuing grower sensitivity to the issue. From the coverage:
THE supermarket giants Woolworths and Coles could be paying farmers as little as 35¢ a kilogram for potatoes and pumpkins and selling them for $3 a kilogram, the latest research from the NSW Farmers Association shows.
The association looked at last week's farm-gate prices for a range of produce, including potatoes, sweet corn, broccoli, tomatoes, carrots and apples to highlight how much supermarket chains pay farmers for their fresh produce.
Their research revealed that farmers were being paid about 40¢ a kilogram for grey pumpkins, which were then being sold on supermarket shelves for as much as $2.78 a kilogram. It was a similar story for tomatoes and carrots.
TK:Interesting debate, but I would suggest the best thing Australian growers can do is adjust their supply to meet the market demand; the margins should take care of themselves. The USDA publishes farm to retail margins for a variety of food groups. Find it here.