Horticulture industry crisis

Vanguard May 2013
Duncan B.

It is not only the dairy industry that is in crisis, Australia’s horticultural industry is also in trouble.

Since 2009, more than 1230 horticulture processing jobs have been lost along Australia’s east coast. Eleven fruit and vegetable processors have closed. Hundreds of tonnes of fruit and vegetables have been dumped or left to waste.

In March, Australia’s last major canning company, Windsor Foods went into voluntary administration, with millions of dollars worth of debt. 80 workers have lost their jobs and farmers contracted to grow vegetables for the company will not get paid. This follows on from the recent closure of the Rosella plant in Sydney, which cost 100 jobs.

The high Australian dollar and the extensive use by supermarkets of foreign produce in their home brand lines have contributed to the decline of Australian horticulture.

Figures compiled by KPMG and the Australian Food and Grocery Council  revealed that Australia’s net trade surplus of food and groceries crashed from $4.5 billion in 2004-5 to a deficit of $2.7 billion in 2110-11.

Dairy industry developments

In the latest development in the dairy industry, Woolworths plans to obtain milk directly from groups of dairy farmers, by-passing the milk processors who normally deal with the farmers.

Under the Woolworths plan, processors would not buy the product, process it and sell it to the supermarkets as is presently the case. Instead, processors would be paid a fee for processing the product. It remains to be seen what the effects of this scheme will have on milk processing companies.

Processors are already feeling the pinch as a result of the strong competition in the dairy industry. New Zealand-based processor Fonterra’s Australian operations copped a 32% fall in earnings for the first half of the financial year. The company has announced plans to cut consumer brands and jobs in Australia.

US farmland sales

Across America, farmers are receiving record prices for their land as big banks, finance firms and equity funds are snapping up farmland. These firms are buying farmland and then renting it out to farmers in the hope of getting high rents. One fund now owns 600 farms.

American farm debt rose by nearly 30% since 2007, and is expected to be US$277.4 billion this year. This figure is likely to be understated as it does not include finance from specialised finance firms or suppliers such as Monsanto and John Deere. Many farmers are taking advantage of the high prices being offered for land to cash in while they can.