The Federal Government’s current national food plan process is heavily dominated by business interests. It is built on flawed assumptions that the market can provide the solutions that our broken food system sorely needs.
Australia’s food system, like the food system globally (see also The GROW Report), is dominated by a handful of corporate players in pursuit of profit. Far from the rhetoric of “free” and “competitive” markets, our food economy is governed by an oligopoly of private interests.
(Super)market domination
Concentration of economic power in the Australian agrifood system is probably best understood through the example of the supermarket duopoly of Coles and Woolworths, controlling around 80% of retail grocery sales. Lesser-known corporate giants include Cargill, the world’s largest grain trader, which became Australia’s largest grain trader when it purchased the privatised Australian Wheat Board in 2011.
Since deregulation of the dairy industry, one multinational food and beverage company, Kirin, controls around 80% of Australia’s drinking milk market, forcing out farmer-run cooperatives. Two companies, Weston Foods and Goodman Fielder, control more than half of the bread and bakery markets.
Private control of agriculture, food processing and retailing means that decisions about what food is produced, how it is processed and where it is sold are driven by profit motive, and not by human needs. Moreover, the huge market share controlled by the small number of companies that dominate Australia’s food system creates the potential abuse of market power.
Farmers' struggle
Farmers feel this impact of this market power keenly. As suppliers to the two big supermarket chains, and to companies like Kirin in the milk market, farmers are forced to accept lower and lower prices in order to win supply contracts. In the milk sector, farmers are receiving a decreasing proportion of retail revenue since deregulation in the early 2000s. The start of the so-called “Milk Wars” between Coles and Woolworths in early 2011, pushing milk retail prices to $1 per litre, only exacerbates this downward pressure on farmgate prices.
In addition to low prices, farmers are forced to meet exacting standards regarding the appearance of fruit and vegetables, to package and label produce at their own expense, and risk having produce returned at the whim of the retailer. Negotiations between supermarkets and their suppliers are not transparent and the resulting contracts, with no standard terms of trade, provide little consistency for suppliers. At times, suppliers are notified of the prices they will be paid after the sale is completed.
It is not only farmers who suffer as a result of the enormous economic power of the handful of companies that dominate the food system. A survey of hundreds of truck drivers working for Coles earlier this year found that the majority felt pressure to drive above the speed limit in order to meet the company’s demands.
Drivers were forced to work for hundreds of unpaid hours per year, waiting in delivery lines, and loading and unloading cargo. Health and safety standards dropped, putting workers’ lives at risk, when the company failed to allow sufficient time for vehicle repairs.
Need for change
It is unacceptable that powerful food companies obtain profits by extracting unreasonable concessions from primary producers and workers in the food system. This imbalance of economic power undermines farmer and rural livelihoods, and threatens the future of Australia’s food production industries.
There has been significant discussion in Australia of the power of the supermarket duopoly. The ACCC issued an astonishing report in 2008 which pronounced the retail industry sufficiently competitive, despite the two largest retailers controlling, at the time, 70% of grocery sales, 50% of fresh fruit and vegetable sales and 60% of all supermarket stores.
Nonetheless, the ACCC did find that some adjustment measures were required, such as lowering barriers to entry for other firms. There has been little progress on this point as Coles and Woolworths have further consolidated their market positions and are refusing to agree to a more “streamlined” process proposed by the ACCC for approving mergers and acquisitions. The retailers are reportedly concerned that the new process will enable the ACCC to block deals and limit their growth plans.
Amid many complaints from farmers and other industry stakeholders, the ACCC’s new Chairman has made several attempts to curb the duopolists' power, including the streamlined approval process for acquisitions. The ACCC has also investigated claims of unconscionable conduct regarding suppliers and misuse of market power regarding private label products. The outcome of these initiatives is yet to be seen.
The national food plan process has been particularly dismissive of concerns regarding the impact of the duopoly. The government has refused to intervene in the relationships between Coles and Woolworths and their suppliers, preferring to “let the market decide”.
The Australian Food Sovereignty Alliance decided in early 2012, after seeking to engage with the government’s flawed food plan process, to initiate the “People’s Food Plan” project. The national food plan fails to provide adequate access to the public for consultation and prioritises the needs of the market over the needs of the people who depend on the system. In contrast, the People’s Food Plan questions the dominance of corporate interests and the market-driven nature of the food system, opening the door to the kind of transformative change that many are advocating.
The People’s Food Plan involves community meetings throughout Australia. At these forums, interested farmers, community activists, food-lovers, students, workers and others will get together to talk about the changes we want to see in our food system. If you are interested and would like to participate in one of these discussion events – you can find out more or contact us at The Australian Food Sovereignty Alliance.
Ian Donald Lowe
Seeker of Truth
As the major supermarket chains have gained market dominance, consumer choices have dropped within their stores. In many cases, one or two major brands and the 'house brand' dominate many sections, with smaller companies losing their shelf space and their sales, leading to their ultimate demise. There has also been a shift in the product range available away from cheaper products to more expensive products or brands that offer a larger profit margin.
Have you ever noticed how every supermarket…
Read moreWade Macdonald
Technician
This issue extends right through our natural resource and food production chains.
Dutch company Van Der Plas who own Seafood Tasmania and that super trawler will no doubt buy out other local commercial fishing licences to increase their quota.
Allowed to Monopolise markets by paying for our political parties election campaigns in exchange.
Michael Croft
logged in via LinkedIn
Well said Claire.
Another overlooked problem with the market mechanism is that there is a glut of food. Australia produces enough food for 60 million and globally enough food is produced for over 11 billion. So much for efficient market theories and demigod invisible hands.
When there is a glut in the market producers become price takers and prices fall. When there is an excess of product you find other things to do with it that give better returns - biofuels and grain feeding ruminants are 'value adding responses to a glut. When there is an excess, wasting 40% of food becomes the norm. When you need to get rid of and excess, obesity is encouraged and also becomes the norm.
The excess of food being produced makes the social injustice of nearly 1 billion chronically malnourished people, a crime against humanity. Since it is corporate market dominance and the profit motive that creates this situation, I look forward to the day when they are in the dock at The Hague.
Michael Croft
logged in via LinkedIn
Forgot to add the environmental injustice, of calls to increase production by 70% when there is an excess, is a crime against the planet and therefore humanity too.
Gerard Dean
Managing Director
Mr Croft
Your comment, 'I look forward to the day when they are in the dock at The Hague.' strikes me as being a little over the top.
Who do you suggests should be on trial alongside mass murderers and torturers, the CEO's of Australia's supermarket chains?
Gerard Dean
Michael Croft
logged in via LinkedIn
Gerald Dean,
Over the top, too passionate? Perhaps, but I consider it extremely offensive that 16,000 children die of starvation every day in a world that produces too much food. Any reasonable person who shrugs off these deaths, or puts them in the too hard basket, is ethically challenged. That these deaths can be traced to the policies large transnational corporations pursuing single bottom line profit maximisation strategies, makes the corporations in question liable in the opinion of many…
Read moreGerard Dean
Managing Director
Mr Croft
A very clever line, ' I don't know about you, but I think the preventable deaths by starvation... ought to be a crime against humanity.'
Firstly, your inference that because I consider your idea to charge the CEO's of Australia's supermarket chains with crimes against humanty is over the top, doesn't mean I condone human starvation.
Secondly, you have continued your contention that preventable deaths by starvation is a crime against humanity and have not said who should be charged.
Should we charge the farmers who grow the food, or the wholesalers who purchase the raw products, the millers who mill the grain, the bakers who bake the bread, the truck drivers who deliver the bread to the shops, the shop keepers, the CEO's of the multinational food companies, the head of the UN, the US President, the UN, or the Australian Prime Minister or us, the customers?
Exactly who should be in the dock at the Hague?
Gerard Dean
Michael Croft
logged in via LinkedIn
Mr Dean, you are wrong. You are wrong because my original comment about CEO's being in the dock for crimes against humanity, was in a paragraph about global corporations and not, I repeat not, about Australian ones. I am surprised at your lack of comprehension because I attempted to clarify this for you in an earlier reply.
In answer to your second point I said "That these deaths can be traced to the policies of large transnational corporations pursuing single bottom line profit maximisation…
Read moreTim Scanlon
Debunker
Farmers have always been price takers, but they had market options. Now they don't and the promotion is for those market options to become even less as the big market players decide the prices, the margins and the quantities. As for the consumer having power, well they don't really, not without market access to farmers or direct supply chains.
An example of direct supply is local butchers and bakers. We have a local baker in town, the quality of bread is fantastic and is baked fresh daily. Most…
Read moreFrances Collins
Rural Dweller
The "good business practises" of streamlining, reaching "scales" of economy, profit for shareholders without any corresponding responsibility for the ways and means of gaining those profits, and providing the cheapest food/product/service mantra drives us to the now. Who will purchase the cheap food/products/services if the consumers themselves have reduced or no employment and therefore little money? Who or what generates the income to pay for your job?
Is it possible to "cheap" yourself or…
Read moreJohn Bloomfield
Retired Engineer
Thanks Frances for a thoughtful contribution.
I share your sentiments and concern at the insidious creeping domination of our society by mega-corporates.
I think it's the short term "cheapness" of transport and energy from fossil fuels that enables the market domination by remote mega business's to succeed.
Until the cost of fuels reflects the true cost to the environment of dumping gigatonnes of CO2 into the atmosphere, small/micro community business's will never again be viable.
In the meantime, price oppressed suppliers should contemplate a return to the cooperative business model to get their products into the marketplace with improved margins.
As more and more consumers find their preferred products deleted from "supermarket" shelves, it presents an opportunity for cooperatives to build a customer base from these dissatisfied consumers.
Gerard Dean
Managing Director
When I was a kid in the Wimmera, our local grocery store ran in the time honoured fashion; you went to the counter and asked for a pound of butter and a pound of sugar and a packet of corn flakes. The shopkeeper talked about the weather and the football and then selected your requests.
The grocery store was a co-operative owned and operated by locals. The board resisted the calls for the grocery store to convert to the self-service model along the lines of the new supermarkets in Melbourne. The…
Read morerory robertson
rory robertson is a Friend of The Conversation.
former fattie
Thanks for your piece Claire. You write: "Private control of agriculture, food processing and retailing means that decisions about what food is produced, how it is processed and where it is sold are driven by profit motive, and not by human needs." Actually, I think that what we eat - as with the clothes we wear - ultimately is decided by individuals voting with their wallets. Ultimately, private firms are very responsive to consumer demand.
In terms of food and "human needs", good information…
Read moreGerard Dean
Managing Director
Ms Parfitt
Were you serious when you wrote, 'At times, suppliers are notified of the prices they will be paid after the sale is completed.'
At Times! Just how do you think 90% of agriculture has worked in Australia for the last 150 years. When we sowed the wheat crop in the Wimmera we had no idea of the final price of a bushell or tonne. We found out the price when the wheat cheque came in.
Most cereal growers, vegetable growers, orchadists and wood growers produce their product and ship it off to auction or sale rooms.
The reason many farmers enter fixed contracts with the supermarkets is to remove the auction process. Naturally, the supermarkets will not offer the highest price at the auction, however it does provide a more secure pricing system than the saleyard.
Gerard Dean
Garry Baker
resarcher
The Federal Government’s current national food plan""" Er, they don't have one - mutterings from Canberra appear in the media now and then, but there is no plan - Other than selling our prime rural land to foreign interests, who in turn have their own plans.
Whilst the editorial is a good read, the content tends to fail on many fronts. Even with small things like Kirin, the big Japanese brewery containing about 80% of our drinking milk market, when in reality its not Kiren at all - it's…
Read more