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New study takes an in-depth look at food pricing.

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DAFF04/037WT - 2 March 2004

New study takes an in-depth look at food pricing

A new Australian Government-commissioned report has identified scope for farmers to extract a greater share of the retail price of fresh food through value-adding and better market information.

"The report provides a ground-breaking analysis of the wide range of factors affecting farmgate, wholesale and retail pricing in Australia's food industry," Mr Truss said.

Australian Agriculture Minister Warren Truss said the report - Study of food price determination - shows that a complex mix of factors contributes to the margin between the farmgate and retail prices of grocery lines across the food sector.

Relatively high labour costs in transport, storage, handling, distribution and the retailing sectors of the grocery chain were primarily responsible for the margin between farmgate and retail prices, the report found.

The report also highlights the relatively low profit margins - less than 4 per cent before interest and tax - in the Australian grocery retailing sector.

It examines and compares prices at the farmgate (the net price to the primary producer), wholesale (price paid at the point where they enter retail distribution) and retail levels (the price paid by the consumer). It also includes case studies on fresh and processed products from a variety of sectors, including dairy, meat, horticulture, grains and poultry.

The report identifies the main factors that affect pricing, such as farm production, trade, supply chain integration, technology and innovation, regulation and compliance, and market dynamics.

Mr Truss said the report is a timely and important contribution to an issue that is often marked by contention and misinformation.

"It will help government and industry work together to find new ways of boosting growth and sustainability in our food industries," he said.

"Specifically, this means investing in knowledge management, better information systems, commercialised research, product development and a range of marketing and promotional initiatives."

"I will also be referring the study to the Treasurer, requesting ACCC consideration, and to the National Food Industry Council, which I chair, for members' consideration and comment."

Copies of the full report can be downloaded as a pdf file from the DAFF web site: (1 of 2) [4/03/2004 12:21:14 PM]

New study takes an in-depth look at food pricing

Further media inquiries:

Minister Truss' office: Tim Langmead - 02 6277 7520 or 0418 221 433

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