Processing the problem

And it’s not as if the growers are uncompetitive; it’s the processing industry that is failing

UNLESS you have not been paying attention, you will be aware that Australia is losing its fruit and vegetable processing industry.

SPC Ardmona is rationalising factories in the Goulburn Valley, Heinz has stopped canning tomatoes in Echuca and beetroot in Brisbane, Simplot may close vegetable processing plants in Tasmania and NSW, and there has been a string of collapses including Windsor Farm in Cowra, Rosella in Sydney and Mondello Farms in SA and Victoria.

There are certainly others that I missed when I was not paying attention.

Processing has been in decline for some years and this is not a new phenomenon. What’s changed is the rate of decline, which accelerated due to the spike in the dollar making exports expensive and imports cheap. While the dollar is now a bit lower, the trend is negative.

This is having quite adverse consequences for those directly affected. Australian workers in processing factories are losing their jobs, while growers are forced to pull out fruit trees and plant different crops. And it’s not as if the growers are uncompetitive; it’s the processing industry that is failing.

For those not directly affected though, the consequences are not negative at all. Imported processed fruit and vegetables are widely available at attractive prices. There are probably people who are eating more fruit and vegetables as a result.

The blame game is in full swing, with fingers pointing in various directions and no shortage of solutions on offer. There is a problem with most of these though, which is that there is no agreement as to which problem requires a solution; the one affecting the workers and growers, or the one that consumers do not have.

Most solutions on offer seek to transfer the problem from workers and growers to consumers by increasing prices. Restricting imports is a good example, whether via quotas, tariffs, or increased biosecurity barriers. The inevitable consequence of restricting supply is to increase prices.

The supermarkets are being blamed for buying imported food in favour of local products, ignoring the fact that consumers vote with their purses and wallets. While it is true that supermarkets are prone to limit brand choices, they are in no position to tell customers they cannot buy cheaper products. No supermarket in the world is able to get away with that.

Some argue that more clear country of origin labelling will help, on the assumption that consumers prefer food that is grown and packed in Australia. This is probably the least harmful option to consumers as the cost of labels is minor and consumers can continue to choose for themselves.

Whether it would make much difference is a moot point though. There are many examples of consumers saying one thing in a market research focus group and doing the exact opposite in the store.

Unless prices are equivalent, I suspect more expensive Australian products will continue to be left on the shelf irrespective of how well identified they are.

As for warning consumers of greater risks with imported products, there will be a legal problem unless there are provable facts to back it up.

One solution not considered very often is addressing the cost and regulatory environment in which Australian processors must operate. The impact of this is substantial, yet it is often assumed nothing can be done about it.

The cost of labour, especially when required to maximise the efficiency of expensive machinery, is a case in point.

While it might not be realistic to expect Australian workers to be paid the same hourly rate as workers in South Africa or China, why does the law require that they be paid substantially more for working shifts or on weekends and public holidays? More to the point, if there are workers willing to work at these times at regular rates, why does the government prevent it?

Then there is the difficulty and cost of getting rid of workers who are not performing, the workers compensation racket, the vast array of health and safety regulations, the labyrinthine tax system, the unnecessarily high cost of energy, AQIS fees, and the legion of petty bureaucrats at each level of government whose job revolves around harassing businesses. Those seeking solutions would do well to consider these.

But in the end there must be solutions that satisfy consumers as well as processors and growers. There is no future in one benefiting at the expense of the other.

Some innovative thinking is required to come up with processed food products that cannot be made more easily or cheaply in other countries. Some people are already doing it.

  • David Leyonhjelm has been an agribusiness consultant for 25 years. He may be contacted at reclaimfreedom@gmail.com
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    FarmOnline
    David Leyonhjelm

    David Leyonhjelm

    has worked in agribusiness for 30 years and is a Senator for NSW representing the Liberal Democrats.
    Date: Newest first | Oldest first

    READER COMMENTS

    Jen from the bush
    27/06/2013 6:30:35 AM

    You missed out holiday pay, David. Why does such a thing exist? If one doesn't want to work for any reason, they they just shouldn't be paid be it for day or for 'annual' holidays. The work doesn't stop yet people leave their jobs for weeks leaving the employer disadvantaged and costing more than double for those weeks as someone usually untrained attempts to do the job.
    V Grower
    27/06/2013 7:10:26 AM

    Interesting read David. All I hear is industry groups like Vegaus whingeing yet offering no credible solutions. I agree with your comment that consumers would also vote with their wallets if labelling requirements were changed, they have done it with cars.
    Nev
    27/06/2013 7:39:14 AM

    I think the simple truth unfortunately, will be the demise of these industries, as we move to a global economy.
    farmed
    27/06/2013 8:18:49 AM

    in italy all the boat people are made to work for farmers for free while their application is being processed. we should do that here.
    jingelic
    27/06/2013 1:25:09 PM

    A very neo-liberal assessment of the situation. The problem's all those wildly overpaid cannery workers, swanning around in their BMW's and living in palatial houses while the poor growers go to the wall. Or maybe not. The truth is that manufacturing is going under across all sectors, because the costs of production in Australia are undeniably higher than in South Africa or China. So what to do? The author's solution is a race to the bottom, with regional Australian workers the biggest losers. What we need is tariffs back to protect the wellbeing of all Australians. Not just one sector.
    Bill Pounder
    28/06/2013 9:08:12 AM

    That's right, farmed, hence all the el cheapo canned tomatoes, etc. Thanks WoCo! Dumping by any other name.
    Agribuzz with David LeyonhjelmCommentary, news and analysis with agribusiness consultant David Leyonhjelm. Email David at reclaimfreedom@gmail.com

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