Price Determination in the Australian Food Industry A Report

• Export prices are driven by global supply and demand. Unlike other globally traded
commodities, rice trade is based on customer specifications encompassing quality, packaging
and delivery. This produces a range of price outcomes.
• Total recorded Australian retail market volumes of main table packet rice varieties have been
steady over recent years. Overall consumption of rice however has been estimated as having
grown, as there has been increased consumption by the food service and food processing
sectors, and an increase in the volumes of imported fragrant and specialty rices.
• Sales by the major grocery retail chains have increased in recent times to be close to 80 per cent
of retail grocery market share, yet this estimate does not include all outlets retailing rice (such
as Asian market outlets).
Figure 106. Rice: Major drivers of prices and costs
The rice industry is a closely integrated industry that retains a managed single desk for export markets. This dominates
consumption of Australia’s rice output. Domestic consumer products are subject to analysis in this study.
1. Farm production factors
• Production volume is highly
dependent on water supplies.
• Most paddy rice businesses are
mixed farm businesses and therefore
rice competes with other crop
options based on return outlooks.
2. Value-chain integration
• Close integration between rice
production, milling and
marketing.
• Increasing scale efficiency and
automation in milling plants to
closely match crop production.
• Farmer-owned business
dominates domestic milling and
marketing.
3. The marketing approach
• Standard product is a staple
food item differentiated by
variety, packaging, quality
and service elements.
• Category is being diversified
away from exposure to
commodity markets.
• Increasing differentiation of a
range of rice food products
tailored to different meal and
snack solutions, and food
service markets.
Export marketing
Farm production
MIlling and finishing
Packaging
Marketing
Wholesaling
Distribution
Retail
Food service
Price Determination in the Australian Food Industry A Report
4. Regulation and
compliance
• Single desk export
marketing of rice
maintains stability in
management of domestic
and export markets.
• Meeting ethical and
product integrity
demands.
• Highly focused on
meeting food standards
legislation.
5. Trade impacts
• Strong influence of rice exports
which account for 80–85% share
of primary production (varying
with crop size).
• Industry returns are driven by
the success by which the
marketer manages the sale of
rice into various export markets
in the context of the tradable
world market for the commodity.
• Export marketing dominated by
branded products.
• Open domestic market for
imports of commodity and
specialty rices.
6. Technology and innovation
• Increasing capital intensity is
improving cost structures.
• Transparency of market prices
and costs in the chain are
provided in pricing and returns
signals to producers.
• Greater investment in innovation
to diversify core rice food
products and extract value from
co-products.
7. Retail market dynamics
• Growth in specialty
varieties (cuisine driven).
• The growth of the private
label has increased the
share of the market
governed by low-priced
products.
• Greater demand for
convenience and lifestyle
solutions in meals has
created strong niches for
pre-prepared meals and
snack foods based on rice.
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