Fruit and vegies: why do they cost so much, and who gets what?

If you've ever wondered how much the farmer gets for the fruit you're holding in your hand, orange growers want to tell you this summer they're getting very little or nothing at all.

A survey of the supply chain for six fresh foods found that shops get as high as a 76 per cent share of the final price while growers, especially of oranges and apples, feel the squeeze.

Fresh produce doing it tough

Leading Valencia orange grower Tania Chapman discusses the factors that contribute to tough market conditions for Australia's fresh produce producers.

Valencia orange grower Tania Chapman said she is getting 25¢ per kilogram, which barely cover her rising production costs. Others are getting as low as 17¢/kg and losing money.

"We're doing it tough. The cost of production is going through the roof, with fertilisers, with fuel, but our returns are going backwards," she said.

Tania Chapman, a valencia orange grower from Mildura and also chair of Citrus Australia.
Tania Chapman, a valencia orange grower from Mildura and also chair of Citrus Australia. Photo: Supplied

"The wholesalers are always going to make money, the retailer always get the biggest chunk. The prices are not changing at the shops, but the prices paid to us are going down."

Fairfax Media found the juicing oranges at three greengrocers for an average $3.82/kg, meaning, based on current wholesale prices, retailers were claiming about 65 per cent of the final price.

For granny smith apples, the wholesale price is $1.92/kg, compared with $4.82/kg at the shops, meaning retailers held a 60 per cent share of the retail price.

John Dollisson, chief executive of Apple and Pear Australia, said the average farm-gate price for all apple varieties last year was $2.57/kg while the retail price was $4.20/kg.

Curtin University researchers  found the right message said in the right way can change Gen Y eating behaviours.
Curtin University researchers found the right message said in the right way can change Gen Y eating behaviours. Photo: Edwina Pickles

In terms of profitability, 2015 was one of the worst years on record, with some growers – like some of the valencia growers – unable to cover production costs, he said.

"We want to work with retailers much more closely to develop strategies that ensure a fair share of profits to both growers and retailers and, importantly, a fair price for consumers," he said.

Food market analyst Steve Spencer, of Freshagenda, warned against comparing farm-gate and retail prices, saying margins along the supply chain varied, especially for fruit, depending on the season and supply and demand.

The final shop price was largely based on affordability – what consumers were willing to pay. For common fruit, that typically hovered between $3 and $4 a kilogram, he said.

"Sure, there are growing costs, in some cases ripening costs, transport fees, some sort of market and distribution costs to a point of sale. It varies over the year depending on the volume of the fruit," he said.

"Vegetables prices are more stable because they typically have a shorter production, so it's easier for supply to be flattened out. They're reliably available for most of the year."

The supply chain survey found the greatest profit margins were in vegetables and herbs, with both a single continental cucumber and a coriander bunch selling for 50¢ wholesale and about $2 at the shops.

A Queensland cucumber grower said an oversupply in the past three to four months left many struggling to sell them for a healthy profit. Cheap prices meant consumers were the winners, he said.

Linda Snart, owner of Village Herb Farm which supplies the major supermarkets, said the real cost of producing fresh food was not reflected in the price consumers pay.

Production costs including irrigation, water and refrigeration, as well as freight and distribution costs, were large factors in determining the price of produce, but more so is the cost of labour along the supply chain, she said.

"It's a huge convenience to go up to a supermarket and be able to buy all [your produce] under one roof. Everything comes with a price," she said.

A bunch of three baby bok choys was 75¢ wholesale and $1.84 at retail, meaning shops were claiming a 59 per cent share of the shelf price.

A kilogram of button mushrooms was $6.50 wholesale and $12.15 at retail, meaning shops had a 47 per cent share.

Chris Cope, of the Sydney Market Reporting Service, which collects wholesale prices, said some growers, especially from the Sydney basin, bypassed merchants and sold their produce direct to retailers, getting a bigger slice of the price pie.

He also revealed two major mushroom growers shut down over the past year because they were not making any money. The sudden dip in supply saw mushroom wholesale prices peak, but it had since stabilised.

"The prices went through the roof about eight months ago. We hadn't seen prices like that for a long, long time, but it's stable at $6.50 now," he said.

83 comments

Comments are now closed