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Tough year has seen veg growers’ profits plunge by more than 90%

By RJ Whitehead , 10-Jul-2014

Tough year has seen veg growers’ profits plunge by more than 90%

Australian vegetable growers are continuing to do it tough, with average profits plummeting, according to the latest data released by the Australian Bureau of Agricultural Resource Economics and Sciences (Abares). 

For the 2012-13 financial year, Australian levied vegetable growers’ average profit was estimated to have fallen to A$5,000 (US$4,700), a drop of more than 90% that equates to A$60,000 from the previous financial year.

This new data re-iterates previous AusVeg messages that Australian levied vegetable growers are currently operating in a challenging environment,” said Shaun Muscat, economist for the industry body representing the interests of Australian vegetable and potato growers.

Although many variables are contributing to this added financial pressure, increasing production costs are undoubtedly one of the major reasons.”

Margin widening

Since 2005-06, cash costs for Australian levied vegetable growers have increased by over 140% while cash receipts have only increased by less than 95%. 

This means that Australian levied vegetable growers’ cash costs have outpaced their receipts, causing significant financial pressure and hardship,” added Muscat.

However, these figures are not unique to levied vegetable growers as this is largely consistent with previous reports undertaken on behalf of the entire vegetable industry.

The National Vegetable Levy covers over 100 different vegetables, including carrots, pumpkins, sweet corn, peas, beans, lettuce, broccoli, cauliflower and capsicums. 

While the majority of growers are undoubtedly experiencing difficult conditions, growers must continue to actively pursue initiatives and opportunities that reduce the total cost of production over the medium- to long-term,” advised Muscat.

Such opportunities could include re-negotiating existing, or entering new, energy contracts for lower prices, and purchasing machinery that will increase productivity, and substitute for labour.

Furthermore, Australian vegetable growers should explore export opportunities, particularly in Asia. Affluence and population in Asia is expected to continue growing, resulting in significant increases in demand for premium quality vegetables from Australia.”

Not all gloom

In light of Asian exports, there has been good news for growers following the industry’s most successful reverse trade mission in June, which involved over 40 leading Asian buyers and retailers.

The event was part of an industry-funded project to provide Australian vegetable growers with the tools to export more of their produce overseas.

Feedback suggests that 90% of [Asian] buyers will increase their purchases of Australian-grown vegetables,” said Hayden Moore, AusVeg’s national manager for export development, following an event in Cairns that involved over 40 leading Asian buyers and retailers.

Moore added that Australia’s growing reputation for R&D is making the country’s produce more enticing to international buyers.

Value-adding and creating innovative new products are both key to accessing new export markets and making businesses more profitable.

It is vital that the industry continues to communicate the R&D which ensures Australian vegetables are safe and of high quality to international buyers and retailers, and to demonstrate these facts first-hand with the produce itself.

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