Key Points
- Farmer advocacy groups have warned inquiries into consumer and supplier exploitation could lead to price increases.
- Farmers have had to foot the bill for soaring input costs, which have risen by 30 to 65 per cent, they say.
- An expert says supermarkets must fully comply with the inquiries to rebuild consumer trust in their pricing.
Queensland Premier Steven Miles used a watermelon to highlight the gap between supermarket prices and what farmers are being paid for their produce last week.
In a social media post, he noted that while customers are paying close to $20 at the checkout for a whole watermelon, the supermarkets selling them were offering farmers as little as $4.
The premier's post comes amid growing concern that supermarkets could be price gouging and profiting off both farmers and consumers, with two inquiries set to examine those questions.
A federal inquiry looking into whether supermarkets are adhering to the industry code was announced in December. It was followed by Miles' announcement last week of a Queensland parliamentary inquiry into supermarket price gouging.
While the upcoming inquiries have been seen as a potential brake on price increases, farmer advocacy groups warn that they could potentially expose unsustainable business models and result in price increases.
Growers say prices may have to go up
Queensland Fruit and Vegetable Growers CEO Rachel Chambers said two potential issues need to be addressed in any review: consumer exploitation and supplier exploitation.
She said farmers are in a vulnerable position, as they have to cover increasingly higher input costs before they can properly price their products, while also competing with producers in other states that may not face the same weather challenges.
Input costs can include anything from water, fertiliser and pesticides during production to picking costs, labour costs, packaging of goods, transport and the cost of machinery upkeep.
"Everyone gets paid all along that whole supply chain without the grower actually knowing what the market will be on the day that the produce is ready to be sold," she told SBS News.
According to Chambers, these costs have gone up anywhere between 30 to 65 per cent in the last two to three years, while the price farmers get for the product from retailers has remained "stagnant".
She said growers hope an inquiry leads to a more even playing field with supermarkets, who currently have an advantage when setting prices as they have access to data for all growers.
'Unconscionable conduct' and a 'wicked problem'
Chambers explained that growers are often forced to sell their produce below a price they're comfortable with, and which won't cover their own costs, under negotiating tactics she believes are "unconscionable conduct".
She worries that Australia is heading towards a potentially "wicked problem" that could impact consumer prices at the checkout.
"What happens if our business models, as they are currently, are unsustainable, and the prices the consumer is paying are unsustainable? Everyone's talking about prices going down… What if costs actually have to go up?" she said.
"Growers are as efficient as they ever have been because they have tried to cut as many costs out of their business … desperation has driven efficiency.
"They're saying there's nothing else to give but input costs keep escalating… and then you've got a supermarket potentially saying we can't give any more to the grower because we need that profit in our business."
Calls for an ACCC investigation
NSW Farmers president Xavier Martin agreed with Chambers that price increases were not moving up the supply chain, forcing producers to foot the bill.
"Farmers are still receiving the same dysfunctional prices for their produce as they did when input costs were far lower," he said.
"(They) are being offered increasingly lower prices that often don't cover their cost of production, with little justification and a 'take it or leave it' attitude from supermarkets."
The federal inquiry is expected to examine whether the supermarket industry code — which regulates the conduct of retailers and wholesalers towards suppliers — is helping improve standards of business behaviour in the sector.
A Queensland parliamentary inquiry into supermarket price gouging was announced by Miles last week. The inquiry's terms of reference will be finalised in the first sitting week of the state parliament in mid-February.
At the same time, calls are growing for Australia's consumer watchdog to investigate supermarket prices.
Martin has called for the Australian Competition and Consumer Commission (ACCC) to launch an investigation into the sector and expressed concern about more farmers exiting the industry, further driving up costs.
Nationals leader David Littleproud also supports an ACCC probe which, unlike a federal inquiry, would have the power to compel participants to provide evidence and enforce penalties if the law had been broken.
Nationals leader David Littleproud doesn't think a Senate Inquiry will "go far enough". Source: AAP
"From the evidence farmers have provided about the mark-up that consumers have been paying, compared to what they received, it’s clear this should be investigated."
Supermarket transparency key to consumer trust
Supermarkets have faced increased scrutiny from consumers and politicians questioning their record profits while they claim they're not making sufficient margins on produce.
Associate Professor Sanjoy Paul from Sydney's University of Technology believes transparency is the key to both fair pricing and consumer trust in retailers, suggestions he has put forward to the Senate ahead of its supermarket inquiry.
"It's a big chain coming from farmers to processors, to wholesalers and finally to retail stores … all these things lead to the cost but this is happening in a black box," he said.
"We don't know how much cost is added, what is the breakdown of those costs. We don't have any policy to regulate and monitor the price."
Paul said consumers did not trust supermarkets, a problem only they could address by demonstrating they're ensuring a fair price.
He said consumers would "happily pay" higher prices if supermarkets could justify their costs.
Woolworths said it was always working to strike the right balance to ensure consumers had access to high-quality produce and suppliers got a fair market price.
Meanwhile, Coles defended its prices, stating that "energy prices, the cost of logistics and packaging have all risen".
- With additional reporting from AAP
