Some controversial declarations from Mr Saul Eslake that suggest that farmers are profiting from natural disasters in Australia have been met with disapproval from grower organisations and economists versed in the ups and downs of the agricultural industry.
I have two fundamental disagreements with what Mr Eslake has pointed out:
1) That growers are actually profiting from current produce price increases.
2) That current biosecurity regulations can handle an increase in imports and that these suffice to ensure a safe flow of imported products.
Let’s start with point 1): in 2007 a marketing plan for the Tasmanian vegetable industry was developed by McKinna et al. This plan made an extensive analysis on the current situation of minimally processed and processed vegetables. Their findings show that Australian growers can only achieve an operating margin of about 4%. In contrast, farm financing obtains margins above 10%.
I am presenting here two profit pools, as calculated by McKinna et al: the fresh carrot profit pool and the fresh-cut vegetables profit pool.
As clearly shown in these figures, growers (i.e. primary production) are not making the most of prices in general. And in fact, retailers are not making the most of profits either. Farm financing, marketers (the so-called “middle men”), logistics and agricultural inputs are the parties that most benefit from the supply chain of fresh produce.
If we don’t believe McKinna’s results, let’s turn to another source: IBISWorld reports. These are the costs and profits of the vegetable industry, as calculated by Riddell (2009).
As for bananas, the situation worsens for growers, if anything. This is a calculation of costs and profits for citrus, banana and other fruit growing in Australia (Riddell, 2009).
Now let’s turn our attention to my point 2): While biosecurity measures often focus on ensuring a safe food supply from the point of view of pests, they do not necessarily ensure a safe supply of food to consumers. The risks analyses undertaken for protecting wildlife and crops are vastly different from the farm-to-fork assessments necessary to ensure that imports are safe to consumers.Test this comment yourself: the latest biosecurity advice can be found here: http://www.daff.gov.au/ba
There are tests applied to risk category foods.Food Standards Australia New Zealand (FSANZ) categorises food as ‘risk’ if it has the potential to pose a medium to high risk to public health. The Australian Customs Service refers 100% of risk category foods to AQIS for inspection and testing against a published list of potential hazards determined by FSANZ.
I have said this before: while Australia ranked 2nd best in food safety systems in a recent international study, trade partners such as China and Thailand have been highlighted as countries that register high numbers of food safety transgressions (both toxicological and microbiological). Is the Australian food safety system ready for increased imports from high risk countries (which means more tests and more costs)? Or are we going to learn things in the hard way, as has occurred in the USA?
While bananas are unlikely to cause food safety issues (because they have hard skins that protect the edible portion from contact with microbes), vegetables have acted in the past as vectors of foodborne disease. I deal with some of these aspects in the Chain of Thought newsletter.
Personally, I don’t have an issue with a rational decision on imports. In some cases and for selected products, imports may help the horticultural industry to raise their game and seek more aggressively export and processing opportunities that do not depend so much in domestic demand for fresh products. But the arguments for increasing fresh food imports to Australia must be based in a careful assessment that encompasses considerations of food security and safety, economics and sustainability in the long term. This is no time to a knee-jerk reaction, as has been said before.
As things are,20% of all processed and fresh fruit and vegetables consumed in Australia are imported. About 30% of all seafood is also imported. There is a shift toward a greater dependency in imports. If we add the effect of extreme weather events, which are likely to become more frequent in the future, the challenges that this represents for the viability of the agri-food sector in Australia are significant.