Free market has growers spitting chips

30 Sep, 2016 02:00 AM
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Our fear is that we could lose as much as 50 per cent of the industry over the next 18 months.

IT HAS been a tumultuous couple of years for the WA potato industry, with many growers concerned about the industry's future following deregulation and the closure of a major processing plant.

On September 6, State Parliament passed the Marketing of Potatoes Amendment and Repeal Bill 2016 which cemented the abolition of the Potato Marketing Corporation of WA (PMC), ending the 70-year-old regulated market in WA.

While the PMC will end at the start of next year, Friday, September 30, marks the end of potatoes being covered by the regulated market, putting growers under pressure to finish harvest by the deadline in order to receive the fixed agreed price for their fresh potatoes.

The change also means 13 PMC employees, along with its board members will be made redundant between September 30 and December 31.

A legal stoush between the PMC and "spud king" Tony Galati is on-going. The shift from a heavily regulated to a free market has left many in the industry uncertain about their business and its future.

To help ease the transition into an open market growers are being offered a $14 million assistance package which is being funded through the Royalties for Regions program.

Of this amount, $12m will be provided to growers through a grower adjustment package (GAP) and $2m as an industry adjustment package.

Potato Growers Association of WA (PGA) executive officer Simon Moltoni said some of the money from the industry adjustment package would be used by the PGA to continue industry marketing and research and development, two functions that were undertaken by the PMC, following the PGA's annual general meeting on September 9.

This included the WA potato seed scheme which was overseen by the Department of Agriculture and Food (DAFWA) and research and development by Murdoch University and private partners.

The PMC and PGA are working on the transition of key functions, such as research and development and marketing, to be completed by the end of the year.

Mr Moltoni said while these were significant decisions it was also an extremely difficult time for growers who were trying to make decisions about the industry, along with how their business would survive post-deregulation.

"A lot of growers are filled with fear and anxiety and trying to make medium to long-term decisions about what sort of industry they want and a major consideration for us has been the mental health and well-being of our members and their families," he said.

"We've seen a political decision create enormous upheaval in their business - it is a fully mature industry with low margins that is capital intensive and these sorts of changes will finish businesses off.

"Our fear is that we could lose as much as 50 per cent of the industry over the next 18 months - this is not only smaller growers, some of largest growers aren't showing a lot of faith in the profitability going forward and they are diversifying in citrus, avocados and kiwifruit."

Mr Moltoni said this would concentrate potato growing among a smaller number of growers, which could affect supplies in the marketplace, leading to price hikes or shortages for consumers.

Mr Moltoni said the industry would face short-term challenges, including shrinking returns to growers.

He expected the 30 varieties grown in WA to reduce as growers "seek refuge in easier, higher returning varieties from a production point of view".

Grower returns will be squeezed as wash packers - wholesalers who wash and pack potatoes and sell to retailers - were put under pressure by leading retail giants to reduce their prices.

"We have already seen a good indication of this following the Premier's announcement to deregulate in 2014 - grower returns have fallen due to pressure from the retailers who are preparing for life after regulation by putting pressure on wash packers," Mr Moltoni said.

"We have also seen market disruption due to the uncertainty over regulations and growers have seen prices fall year-on-year by up to 25 per cent.

"It has been a difficult period leading up to the official deregulation and we expect grower returns to fall again.

"Where that price point will be we're not sure."

Long-term there may be pressure from retailers to bring in potatoes from interstate if the local industry could not maintain supply, something he said would be "devastating" for WA growers.

"If at best we can only deliver intermittent supply, there won't be much before retailers go to the minister of the day and say 'why are we protecting the borders for an industry that can't supply' and then you get spuds coming in regardless of biosecurity issues' - which will be devastating for the local industry."

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