Price Determination in the Australian Food Industry A Report

Margins in the chain
• Our analysis of the margins captured by each major sector engaged in the rice value chain is
represented below.
Figure 111. Share of retail sales value of rice, long grain, 1kg, average all
grocery retail sales
%
100
80
60
retail
processor
grower
40
20
0
2000
2003
Source: Industry sources
• This has been compiled by reference to the average retail value of long grain product in the
Australian market (per ABS data), the calculation of the apparent average net wholesale selling
price and the calculation of a derived farmgate return gained from the retail products market.
• The past several years have seen a gradual increase in the share of the retail sales dollar (per
kg) captured by the retail sector through a combination of increasing retail selling prices,
increasing use of private label products and a greater investment in trade spending and
promotional activities by marketers.
Drivers of cost
• Variation in the major costs in the rice value chain are largely determined by the annual size of
the rice crop.
• The major cost in the production of bulk milled rice is the raw material which is essentially
struck as a residual amount after the industry meets major costs of milling, marketing and
distribution.
Figure 112. Share of rice milling costs
%
100
80
60
40
20
0
1998 1999 2000 2001 2002
Source: Sunrice annual report 2003
finance
depreciation
• The Australian industry has undertaken significant rationalisation of milling capacity and
upgrading of technology in an ongoing drive to deliver best practice and lower cost.
• The local industry, unlike its competitors in most major rice growing regions around the world,
receives no production subsidies.
• This has led to a reduction in like-for-like conversion costs.
freight
labour
rice
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