Price Determination in the Australian Food Industry A Report

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Projected export returns for the coming seasons – taking account of supply and demand trends in world markets and expected currency exchange rates – will not allow producers to cover the cash costs of production. This is expected to see further declines in production through farm exits. An analysis presented by the Centre for International Economics to the review of industry arrangements in 2002 suggested that the industry will only be capable of restoring past profitability levels through the chain if it can achieve productivity gains of around 37 per cent (Cleaning Up the Act, CIE 2002). That work suggested that gains can be made in: • labour productivity; • land productivity; • harvesting productivity and practices; • cane movement logistics post-harvest; and • milling efficiencies. Price Determination in the Australian Food Industry A Report 98
RICE Analysis of the determinants of prices and costs in product value chains RICE – OVERVIEW Background • The rice industry is predominantly export-focused with much of the industry managed by a single integrated grower-owned cooperative, Ricegrowers, which trades as Sunrice. • The industry structure has historically been production driven, with processing and marketing mostly grower-owned but in the past five years the industry has developed a strong market focus aimed at maximising industry value. • The industry presently retains a single desk export regime in New South Wales (where the vast majority of rice is produced) under the direction of the Rice Marketing Board. The industry’s product mix and use • The industry has experienced a steady upwards trend in production over the past 30 years with the growth in export markets demonstrating the competitiveness of the Australian production sector. • The market mix of the industry in 2002 saw only 18 per cent of the Australian crop consumed in the domestic market using a range of market channels, including grocery retail. • Whilst medium grain is the major crop variety produced, the majority is exported. • Australia supplies about 20–25 per cent of the traded world market for medium grain rice into discerning consumer markets. • Australia imports a range of rice varieties with no trade barriers in place except quarantine restrictions on brown and paddy rice. • Demand for quality medium grain rice has risen in recent years as markets such as Japan have opened with more liberal trade. Major drivers of pricing • Rice is a globally traded commodity. Returns to the Australian industry and therefore net farmgate returns are heavily influenced by the returns from the international market for rice. This reflects the high proportion of exports coupled with the effectiveness achieved in milling and marketing. Figure 105. Indicative price of rice, medium grain, US$/tonne, bulk 4% ex-Spout Sacramento, 1996–2003 $ 600 500 400 300 200 100 0 1996 1997 1998 1999 2000 2001 2002 2003 Source: Creed Rice Price Determination in the Australian Food Industry A Report 99
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Price Determination in the Australi
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© Commonwealth of Australia 2004 T
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FOOD AND AGRICULTURE BUSINESS GROUP
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FIGURES Price Determination in the
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• The current focus of retail cha
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• assertions as to market power i
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Overview - main drivers of prices i
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Food lines The analysis of food pro
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Figure 1. Overview of the approach
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Figure 2. Corporate profitability I
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Figure 4. Major drivers of prices a
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5.3 The greater influence of prevai
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DAIRY - PACKAGED MILK Overview of t
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Figure 10. Whole milk, 2 litre, sup
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Prices through the chain Our analys
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Figure 16. Natural cheddar cheese:
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Farmgate prices Farmgate prices are
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DAIRY - ANALYSIS OF PRICING OF DAIR
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Figure 25. Dairy butter and blend s
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‘Step-ups’ are paid by several
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THE MEAT SECTOR Analysis of the det
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The approach taken The pricing anal
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The changing value chains - various
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The approach taken Assumptions used
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Figure 39. Lamb market sales, ’00
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Figure 41. Lamb: Major drivers of p
Page 60 and 61: Observations The price comparison s
Page 62 and 63: Figure 46. Pork products, supply ch
Page 64 and 65: Figure 48. Value and cost-adding fr
Page 66 and 67: Supply chain management Wholesale m
Page 68 and 69: Figure 51. Fresh vegetables: Major
Page 70 and 71: FRESH HORTICULTURE - WHOLESALE MARK
Page 72 and 73: FRESH HORTICULTURE - ANALYSIS OF PR
Page 74 and 75: market access - in the United State
Page 76 and 77: The industry’s product mix The ke
Page 78 and 79: PROCESSED FRUIT AND VEGETABLES Anal
Page 80 and 81: Figure 69. Frozen vegetables, peas,
Page 82 and 83: PROCESSED PINEAPPLES - ANALYSIS OF
Page 84 and 85: Figure 75. Fresh fruit, with juice,
Page 86 and 87: GRAIN AND OILSEED PRODUCTS Analysis
Page 88 and 89: Figure 79. Flour, 1kg, supply chain
Page 90 and 91: Figure 82. Share of retail price of
Page 92 and 93: OILSEEDS - OVERVIEW Background The
Page 94 and 95: Figure 87. Oils and fats, supply ch
Page 96 and 97: The amount represented by the retai
Page 98 and 99: Industry risks The key area of risk
Page 100 and 101: • The major cost faced by egg pro
Page 102 and 103: Figure 96. Consumer price index, fo
Page 104 and 105: • Many such operators have indica
Page 106 and 107: SUGAR PRODUCTS Analysis of the dete
Page 108 and 109: Figure 103. White sugar, 2kg, suppl
Page 112 and 113: • Export prices are driven by glo
Page 114 and 115: Retail prices • The average retai
Page 116 and 117: Industry risk • The overall retur
Page 118 and 119: 4. The performance of Australian fo
Page 120 and 121: THE PERFORMANCE OF AUSTRALIAN VERSU
Page 122 and 123: THE PERFORMANCE OF GLOBAL BRAND MAN
Page 124 and 125: THE PERFORMANCE OF PRIMARY MANUFACT
Page 126 and 127: Our purpose in preparing this secti
Page 128 and 129: GROCERY RETAIL - WHAT DETERMINES PR
Page 130 and 131: The consumer trend towards eating o
Page 132 and 133: GROCERY RETAIL - PERFORMANCE OF GRO
Page 134 and 135: 6. Issues for consideration ISSUES
Page 136 and 137: PRODUCER INTEGRATION Does integrati
Page 138 and 139: Industries have in several cases ta
Page 140 and 141: Examples include: • 1 litre milk
Page 142 and 143: Figure 132. Targeting the stomach H
Page 144 and 145: MAJOR ADJUSTMENT - WHAT’S HAPPENI
Page 146 and 147: THE IMPACT OF DROUGHT The sector Di
Page 148 and 149: Price Determination in the Australi
Page 150 and 151: Oczkowski, E, Murphy, T 1999, Influ
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