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Select Committee on Australia's Food Processing Sector
Australia's food processing sector
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Select Committee on Australia's Food Processing Sector
Xenophon, Sen Nick
Madigan, Sen John
Edwards, Sen Sean
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Select Committee on Australia's Food Processing Sector
(Senate-Friday, 11 May 2012)
CHAIR (Senator Colbeck)
- CHAIR (Senator Colbeck)
Content WindowSelect Committee on Australia's Food Processing Sector - 11/05/2012 - Australia's food processing sector
RANFORD, Mr Trevor Munro, Consultant, Summerfruit Australia Ltd and South Australian Horticultural Services
CHAIR: Welcome. Thank you for your time today. We have received your submissions. Do you wish to make an opening statement? I must congratulate you on your tie. I do not know whether we can incorporate that in Hansard or not, but it is highly appropriate. Is it proprietary?
Mr Ranford : No, it is just one out of the wardrobe.
CHAIR: We compliment you on your wardrobe.
Mr Ranford : I can supply you with some ties, if you like. One of the growers' wives in the Adelaide Hills makes them.
CHAIR: Really? Sensational.
Mr Ranford : Thank you for the opportunity. In an opening statement my list is about the food-processing sector. I have always believed that, to be able to process food, you have to have the raw product in the first place. So we need to go back to the grassroots of production. One of my early mentors told me that in horticulture there were three components—one was export, one with domestic and one was processing—and if any one of those were weak then the industry was potentially weak. I would suggest to you at the present moment in horticulture in Australia all three of those are weak and therefore we have a weak production sector and that leads to a weakening processing sector. The issues that have been raised within the submissions highlight some of the areas of concern for industry.
Senator XENOPHON: Thank you for your submissions. You have referred to three elements. Where do you see the current weaknesses in either production or processing? Going back to the last time you were here to give evidence it was in relation to the issue of apples and pears and the access of New Zealand apples and the biosecurity concerns of Australian apple and pear growers. To what extent do biosecurity concerns add to production costs at a local level in terms of taking additional precautions or affecting even investment confidence in the industry if there is a concern that there could be an outbreak of, for instance, fire blight in the apple and pear industries?
Mr Ranford : There are a number of components. First of all, the industry and growers need to be profitable. We talk about productivity but, at the end of the day, they need to be profitable. The majority of growers are either borderline or actually losing money, so I do not think they are a profitable sector. Certainly the export markets are difficult—
Senator XENOPHON: Are you talking about apple and pear growers?
Mr Ranford : I am talking across the board. I can give you examples of many horticultural sectors that are struggling at the present moment.
Senator XENOPHON: Has this got worse in the last two or three years or has there been a continual trend? Has it been brought on by the Australian dollar, by labour factors—what factors?
Mr Ranford : Again, I have been involved with horticulture for 34 years. The industries that I worked with in those early years were strong in all sectors. I think we have seen a gradual decline for a range of reasons. Certainly the cost of doing business is increasing daily, making it harder on the margins and therefore harder on the profitability. If we look at the issue of New Zealand apples or any other product coming into this country, certainly there are some biosecurity issues. But the greater concern is the fact that we are only a 23 million population and it does not take much to have an above average crop to see the prices of a commodity decline quite dramatically. So if you add a high season of production locally and then add imports on top of that, then something is going to give, and at the end of the day it is probably going to be those bottom-end growers that just cannot afford to maintain that payment outwards all the time.
Senator XENOPHON: Specifically with the apple and pear industry, has there been any perceptible decline in long-term confidence since the importation of New Zealand apples?
Mr Ranford : Certainly there has. Again, if you look at them and at other commodities, the numbers of producers have declined dramatically in this country in all commodity areas, and you add New Zealand and you add China. Personally, I do not think that they are of greatest concern; once the US happens to get apples into the Australian market they will potentially do more damage in the marketplace than either China or New Zealand. But you add those three into a domestic market. The other side of it is that the industry has not, for years, had a strong export ethos. That is a weak component of those three silos I talked about. They now need to look at trying to reinvent themselves in an export market.
Senator XENOPHON: Going back to the apple industry, you are saying that, once US apples come in, combined with New Zealand and Chinese apples, you think they will put a significant downward pressure on prices and, with it, the viability of the Australian apple industry?
Mr Ranford : I believe so. I think the Americans are a different trading beast to others and, from my perspective, they are very bullish in the market and will do whatever they need to do to make a position in the market.
Senator XENOPHON: So you are saying that apple orchards might just be left to die or be ripped up?
Mr Ranford : Well, the industry has got to look at itself. Certainly, if there is no succession in the business, there will be growers that move out of that business. Those orchards may or may not be picked up by other growers, but certainly we are seeing a shrinkage in the size of the industry and, once that shrinks, the viability of the industry also comes under pressure.
Senator XENOPHON: Can I finish up—because I know there are lots of other questions—with a double-barrelled question to you. What form of regulatory regime do you think would best serve both horticultural and national needs? Together with that, can you give examples of some of the cross-jurisdictional regulations that are causing difficulties and regulations generally that cause difficulties for horticulture?
Mr Ranford : I certainly would not want to see too many more regulations in place. There are a whole range of regulatory things on a day-to-day basis that add to it. Currently as an industry we are dealing with APVMA and their decision to implement downwind buffer zones on the use of certain chemicals. If that particular process comes into place and you end up with a buffer from 40 metres to 300 metres, then certainly most orchards and producers in the Adelaide Hills or in other regions would go out of business. So there are all these subtle things in relation to these sorts of production regulations that are creeping up all the time. Again, we see governments saying, 'We are reducing red tape,' but quite frankly I have not seen the reduction in red tape; I see the increase in red tape as far as producers doing business is concerned.
Senator XENOPHON: All right. Chair, I have other questions, but I just thought I would—
Senator MADIGAN: Thank you, Mr Ranford. Do you see a link between pressures being put on food producers and processors and this incursion of urban development into some of our prime agricultural land?
Mr Ranford : Very much so. I think we have not, either at a federal level or at a state level across this country, really done enough to protect prime production land. Again, if I take the South Australian experience, we have a whole range of things being looked at by different organisations. You have the state government trying to bring in certain bits of legislation to protect the Barossa Valley and McLaren Vale. I work with the Adelaide Hills Council and currently we are looking at designated primary production land and how we protect that. We have people running around saying, 'World Heritage listing would help us.' So the simple answer is: yes, we have lost a substantial amount of agricultural and horticultural land over the years through what I believe are poor planning decisions at all levels of government.
Senator MADIGAN: Do you find there is an anomaly—a disjointed government policy, let us say—where on one hand we are told about the food plan and talk about food security and these big markets overseas, but the rhetoric and the reality do not marry up?
Mr Ranford : Very much so. I probably have a cupboard full of plans in all forms over the years. I suppose part of the problem is that we have government rotation in a sense: we have three- or four-year terms and things change. I do not believe we have a single framework which we all work within, and I believe you have to build any framework up from the grassroots level and not from the top down. I see so many plans, whether they be at federal level or state level, being developed by bureaucrats in a sense, and their process of consultation is to say, 'Here's a document,' and when you comment on that document you are criticised because you are criticising their work instead of starting with a clean slate and building something upwards. I think that, if we really want a strong food sector in this country, we have to go back to making the grassroots growers and the grassroots businesses profitable, and all of those other things will flow on. We tend to use the Australian dollar as a reason, and I am not sure that it is always the situation if we look at some of the markets. We have to remember that in horticulture we are niche producers; we are not major producers of any one commodity. Therefore we have to target our products, and if we target them into China at that middle- or high-income-earning area then we could sell everything that we produce.
Senator MADIGAN: Do you believe it would be constructive if we were to have more of a bipartisan approach to our food industry production processing where governments of all persuasions were to come together—the opposition and the government—to say, 'What is that we want for 10, 20 or 30 years from now?' It seems we have continually shifting sands, but the people who suffer in the end are our farmers and food producers because we are not giving them something about which they can say, 'We know all sides of politics agree on this and are prepared to adopt a bipartisan policy going from government to government.'
Mr Ranford : I think growers need stability. We get regulations that change and things happen all the time, but there is no stability, and therefore where there is no stability there is no confidence in the business, and when there is no confidence there is no investment. It is a flow-on thing. I believe that it needs that sort of approach and the development of a plan that is for 10, 20, or 30 years in a visionary situation—and is not played with, three years in, to make a dramatic change. You might tinker with it but you need that framework. When everybody is on board the chances of success are far greater.
Senator EDWARDS: I am just sending an email about the 300 Murray Goulburn workers that have lost their jobs today because of flexible workplace and high energy costs for their employer. This sector is marginalised by the duopoly of Coles and Woolworths—is that a fair comment?
Mr Ranford : They certainly have a major influence on the way that business is done.
Senator EDWARDS: So much so that we cannot get anyone to appear here without either going into confidence or having their submissions made confidential for fear of reprisals. Is that fair? Is that a general industry sentiment, that they might be given a 'holiday' if they speak out?
Mr Ranford : From an industry point of view, coming in and talking about a duopoly? Yes, very much so. In particular those who are supplying to the industry or the duopoly are certainly not inclined to put their ability to sell to one or the other—or both—of them on the line by appearing in front of these sorts of committees.
Senator EDWARDS: Have you heard of examples of supply agreements by the retailers, whoever they may be—there are a number of them in this country—which would qualify as unconscionable conduct under section 46 of the Competition and Consumer Act?
Mr Ranford : Certainly, there are examples. I am not sure whether they would fit those definitions or be considered unconscionable. There was an experience a number of years ago with a cherry grower who supplied cherries into one of the supermarkets in Western Australia. Some time later, the supermarket decided to return those products. When you looked at the process they had actually been stored in the supermarket's own cold-store facility for a two-week period. The quality declined there. They then tried to pass that back to the grower and say that they did not meet specifications. There are situations where they will come up with a price and say, 'This is the price we are going to pay you for the product.' There are other times when the market is slow and they do not have a sale for the order they might have put in, so it is then forced back to the grower or the supplier to wear the loss. There are numerous examples of those sorts of things going on.
Senator EDWARDS: Talking about your industry as a whole—I am not trying to single anybody out because I do not want to be to blame for giving somebody a 'holiday' as they call it in the industry—is there any talk of how the ACCC could intervene and help your industry? Is there a perception about the ACCC's role and the way in which it regulates what many participants in your industry would say is a complete market failure?
Mr Ranford : I do not believe there is anybody in the industry that has any confidence in the ACCC and this process. We have had at least two reviews on the duopoly process and they have all come out saying that it is not an issue. The reality is that the right questions are not being asked. It is not rocket science. You only have to look at today's AdelaideAdvertiserwhere we have an advert by Woolworths which says: 'One-kilo packet of pink ladies, $1.98 each.' Is that $1.98 a packet or $1.98 per apple? That price level is probably for small fruit in bags. Then you go to Coles and there is an advert for red delicious. The reality is that those retail costs are probably not making cost to production. You only have to take the logic of looking at what is cost to production within the industry. These days with the work within Plant Health Australia most industries now have an owner reimbursement cost model so that, in looking at the aspects of what production costs are and what retail costs are, it is not hard to see that in a lot of cases the grower is not getting a return that covers production costs.
Senator EDWARDS: I will come back to the question of the ACCC, but you highlight another point there. You have just held up a daily newspaper out of Adelaide, which shows pages and pages and pages—full pages—of retailers' advertisements. That is what you have shown the committee.
Mr Ranford : That is right.
Senator EDWARDS: With that kind of presence in the media, does it surprise you that I have an enormous amount of trouble getting opinion pieces published which may be slightly critical of the role of retailers in their dealings with producers and manufacturers?
Mr Ranford : I think that is a typical type situation—
Senator EDWARDS: Does your organisation put out press releases to find that they go off into the ether never to be published?
Mr Ranford : Certainly industry organisations do and most of the horticulture industry organisations, particularly those that have got marketing levies through Horticulture Australia Limited, are always working with the retailers, but at the end of the day we cannot get all of the retailers in the same room together to talk about—
Senator EDWARDS: And you never will.
Mr Ranford : I accept that, but industry pressures—there is a lot of one-on-one work done with the retailers. Again, there are issues in relation to how retailers actually handle the product and I do not think that they are good at presenting fresh food and vegetables in this country.
Senator EDWARDS: Just going back to the couple of inquiries that you have had, you said they do not ask the right question. Do you think the question for them as to what they are trying to address is: is the consumer being served by this process? Whereas you probably assert: does the Australia public want a food production industry in this country?
Mr Ranford : That is right. At the end of the day if our costs keep increasing and growers keep leaving the industry and we do not have any food production, then we will get to a point where we become a net importer of horticultural products instead of being what everybody believes we could be—and that is a net producer and exporter of high-quality fruit and veg.
Senator EDWARDS: The new chairman of the ACCC has been somewhat proactive in his public comments in saying, 'Come forward. Come see me. Come any time and come as many times as you like.' I am paraphrasing it here of course; they are not his exact words. He has certainly shown a keenness to engage with groups like yours. Have you seen that and are you tempted now to go and talk to him about your issues?
Mr Ranford : I cannot specifically talk for the individual groups; I do not work for the individual groups anymore in that sense. I am not aware of any of the industry groups at this point in time taking up that offer. Certainly, an individual like me, who is no longer tied to an industry organisation, probably should be taking that sort of action.
Senator EDWARDS: And that is based on the fact that you have nothing to lose but accumulated knowledge, which you believe is important for the process?
Mr Ranford : That is very much so.
Senator EDWARDS: I would encourage you, Mr Ranford, to get in touch with Mr Sims.
Senator MADIGAN: Mr Ranford, do you believe that the open slather approach that we currently have will, in the longer term—I suppose governments think in the shorter term and getting the cheapest food possible. If it continues the way it is and we do not address this situation do you honestly believe that, in the long term, when our farmers and food-processing manufacturing have been destroyed for the least common denominator, there will be cheap food in this country if we do not have the ability to produce our own?
Mr Ranford : It is a matter of what you define as 'cheap food'. I would tend to argue that, in a lot of instances, people do not really appreciate the true cost of production of our horticultural products and, therefore, they have been getting cheap food, particularly fresh produce, for a long time. I do not see us going down the track of developing the concept of cheap food. From my perspective, cheap food is going to be a lower quality product and we used to put that lower quality product into a processing process. I do not believe we should be aiming towards cheap food. I think we should be aiming towards something that is equitable to all concerned.
Senator MADIGAN: So, in the long term, would you agree that it is not in the national interest or in the people's interest that this situation continue?
Mr Ranford : No. As I said, I see it declining. At the present moment, if you look at the levels of imported vegetables, particularly, and packaged vegetables, they are far overreaching our own production and, ultimately, a lot of our fruit will go the same way. The other thing we have to look at is that some of our fruit production in particular, and even our vegetable production, is counterseasonal. So having US cherries in this coming winter is really not having an effect on Australian cherries, so there are components as far as imports are concerned. If you walk the supermarket aisles at the present moment, you would probably find that the majority of fresh fruit and vegetables, but particularly fruit, are Australian produced. In some instances, we have to be careful of the import component. From my perspective, what our industries have to do is up the ante on their ability to export product as a way of allowing the level of production to be maintained at a critical mass, or even increased, as well as support a strong domestic market situation.
Senator XENOPHON: I want to bring up the issue of food labelling. You referred in your submission to confusion in food labelling. What do you think should be the aim of food labelling? How do you think it could be improved? I think Dick Smith this morning was quite pessimistic. He was saying that we have been talking about it for 20 years, that there are some very powerful interests and that some multinational food processors will just get up and leave if they do not like what we are doing. Do you have a view on traffic-light labelling?
Mr Ranford : I certainly think there is a need to do something about food labelling. I came up on a couple of Qantas flights and was supplied a cake or a muffin. This says, 'Made in Australia'. I am not sure whether it is the cake or the package that is made in Australia. I have another one here which was on top of the Berri orange juice. Quite frankly, I struggled to read it but it does tell me that it is packaged in Australia and made of imported and Australian juice. I do not think there is clarity in our labelling. We are always looking at the use of words rather than looking at simple processes. In the case of my rhubarb and whatever it was muffin, if it had a little circle on it which says '100 per cent Australian ingredients' then I would know what it was. I think there is a need to be more specific about ingredients, products that are in there, as to whether they are Australian and what percentages they are in that particular case. The Berri juice may well have had five per cent of Australian concentrate versus 95 per cent of Brazilian concentrate. I think consumers want to know those sorts of aspects and I think they deserve to.
Senator XENOPHON: You have been part of this industry for 34 years and I know you are highly regarded in the industry nationally. Without overstating anything, how bad are things in the horticulture sector in terms of the potential growth of the industry or the potential decline of industry? Where do you see things going if nothing changes policy wise? If you see it heading for decline, what two or three things could help arrest that decline?
Mr Ranford : I see it continuing to decline given that the age of a lot of our farming communities is also increasing, but there are some sectors that have got some young people. Probably the three aspects are getting away from increased regulations that make production hard, governments working in true partnership with industry in any of these markets rather than a top-down approach and the aspects of making the environment such that business can invest. If businesses are profitable and they see a future, they will invest and will grow. There are some very good examples of that. I think you mentioned Beerenberg before, a company in my area of Adelaide Hills. I have seen it grow from a small backyard strawberry farm to what it is now. There are people in the mushroom industry like the Schirripas who have made major investments. But they have been forced to make move from one area to another to another to establish their facility out at Monarto, which adds increased costs.
Senator XENOPHON: Why did they have to go to Monarto? Monarto is about 60 or 70 kilometres from Adelaide.
Mr Ranford : That is right. Each time the expansion of the city forced them from the centre of Adelaide out to Aberfoyle Park to the south and they have gone to Murray Bridge. It is new investment money but it also adds to the carbon footprint having to transport their product from there back into the Adelaide market and all those sorts of things. We do not have at any level at the present moment, I do not believe, an investment friendly system for these sorts of people to invest money.
CHAIR: I want to go quickly to one item in your submission, and that is the Horticulture Code of Conduct, which you are not overly complimentary of. We had a chat about that to one of the other agencies in the context of what other systems we might be able to put in place around competition in the supply chain and having an even balance of power in the process. That was the original objective of the Horticulture Code of Conduct, to define some of the trading relationships in the supply chain between growers and the markets. You obviously do not see any effects, apart from red tape and the cost, that have come from the Horticulture Code of Conduct. That might be a factor of design, but if we are looking at this whole process in a policy context, we talk about the power of supermarkets and the impact on the supply chain. Where do we look? Is an ombudsman likely to do the job or do we have to change something else?
Mr Ranford : I can give an individual comment on that. Certainly there are some sectors of the horticulture industry that support the code; there are other sectors that do not. I think one of the problems was that the code does not take in the whole supply chain. It really is only market and grower; it is not related then to the retailer and the others in the chain. So that in itself is a major failing. If we want to cover the whole chain, let's do the whole chain or do not do anything.
Really it was about relationships. There are growers that have a good relationship with their market and their market agent, because they go and see them and they look at what they are doing. There are others in the industry—and growers are as much at fault in a lot of these situations. They will produce a product, put it on a truck and send it to the market agent—the market agent does not even know it is coming—and expect that they are going to get a good price for it.
We have to go back and look at where the problems were and try to deal with some of those problems. Regulatory aspects may not be the best way to deal with them. But, if we are going to retain it, then it has to cover the full supply chain and not just be between the grower and the market agent in that system.
CHAIR: Thank you, Mr Ranford. Thank you for coming and for your submission. We appreciate your input into the inquiry. That concludes today's proceedings. I thank all of our witnesses today for their presentations.
Committee adjourned at 15:36