Almost two thirds of food producers say they’re going backwards financially, as food inflation impacts more Australian families.
A NSW Farmers business sentiment survey revealed 64 per cent of farmers reported business conditions had deteriorated over the past 12 months, while only 12 per cent stated they had improved. Worryingly, that trend was set to continue over the next year, with 66 per cent of farmers expecting business conditions to get even worse and fewer than 10 per cent predicting an improvement.
The main economic causes of these negative sentiments were commodity prices and interest rates, NSW Farmers Economist Brendan O’Keeffe said, with 72 per cent of farmers voicing concerns about the prices paid for the food and fibre they produce, while 51 per cent saw increasing interest rates as a handbrake on the sector.
“We know the Eastern Young Cattle Indicator has almost halved in a period of less than year, from 1,092 c/kg cwt in September 2022 to 561 c/kg cwt as of late June,” Mr O’Keeffe said.
“According to ABARES, wheat and canola export prices as of June 21 had decreased by 30 per cent and 37 per cent respectively over the past 12 months.”
One farmer responded that there had been a “dramatic decrease in income and major increase in all expenses” – a sentiment echoed by many in the industry, Mr O’Keeffe said, which was in stark contrast to the rising food prices people were paying.
“We’ve seen food prices at the retail level increased by 7.9 per cent in the 12 months to May, with price rises right across the board from bread to meat. This cannot be explained by supply shortages with production strong across grains, fruit and vegetables, and livestock,” he said.
“If anything, food prices should be decreasing due to more consistent supply of fruit and vegetables since the floods in June-July last year, while food demand is stable, and it is likely people are reducing spending wherever possible in the face of higher interest rates.
“Finally, it can’t be explained by cost increases, as shown by a large decrease in fuel prices of 8 per cent over the past 12 months, which is a major input to post-farmgate logistics and transport costs.”
Mr O’Keeffe said the findings reinforced calls for the Federal Government to urgently adopt the recommendations of the ACCC’s 2020 Perishable Agricultural Goods Inquiry and implement an economy-wide prohibition on unfair trading practices, an overhaul of the current merger and acquisition approval process, and making the Food and Grocery Code mandatory with civil penalties for breaches.
“Farmers find themselves at a loss to explain the growing price gap between farmgate and retail, and it’s ordinary Australians who are copping it,” Mr O’Keeffe said.
“We’re increasingly hearing from members that they believe retailers are continuing to exercise market power to capture super profits, simultaneously taking advantage of producers and consumers in the process.
“I’d expect there will be a lot of close scrutiny of these big companies and their annual financial reports in the coming months.”
