Price Determination in the Australian Food Industry A Report

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THE IMPACT OF DROUGHT The sector Direct impact Background factors Effect on prices Dairy Less feed available for milk production. Lower supplies at sharply higher prices of feed grain available to milk producers on a spot basis. Weakened international market due to oversupply from the European Union and a slowing of demand in major markets. Global shortage of feed grains due to poor climatic conditions in key producing countries. No direct impact on dairy product prices in the domestic market because milk supplies maintained to meet fresh milk market needs. Production flows in major parts of the industry fell but by an insufficient volume to put pressure on national daily milk supplies. Beef Producers opted for earlier turnoff rather than feed cattle through to full fattened maturity, so creating a temporary oversupply of beef on the market. Export beef market experienced sharp decline due to the fall in consumer demand in Japan with a bovine spongiform encephalitis outbreak which depressed world prices. Lower beef prices at wholesale – little impact on retail prices. Price Determination in the Australian Food Industry A Report Lamb Pork Cut in sheep numbers and therefore lamb supply. Reduced volume has placed great pressure on the meat processors who face lower throughputs and tight product margins. Less feed available for pork production. Lower supplies of feed grain at sharply higher prices available to domestic customers on a spot basis. Pork production fell due to poor producer prices. Continuing strong international demand for lamb. Increasing imports of pork into the commodity sector of the domestic manufactured meat market. Imports more competitive with the rising value of the Australian dollar. Increased product prices through the chain. Lower increases passed through into retail product due to price competition from other meats. No impact on retail prices due to retained supply lines of fresh product. Reduced wholesale and OTH prices for carcass and major portions. 134
THE IMPACT OF DROUGHT The sector Direct impact Background factors Effect on prices Fresh fruit and vegetables Lower production volumes and quality due to lower water access for feed crop production. Retail market competition intensifying, direct buying needs of major buyers increasingly precise – requires greater certainty of supply of quality product on the shelf to give living proof of trustworthy fresh appeal. Shortages of supply pushed up produce prices through to retail point of sale – with varying effect depending upon seasonal and geographic availability. Flour Grain supplies fell, prices increased. World prices for grains rose sharply due to lower available global grain supplies and inventories. No impact on consumer prices. Eggs Higher costs of feed grain (as noted in other areas). Increasing competition at wholesale and retail levels. Wholesale and retail prices increased to cover the higher costs of production so as to ensure security of supply to the market. Sugar Poor growing conditions reduced cane production. Worsening world sugar trade position – unaffected by conditions in the Australian production industry. No impact on sugar prices. Rice Less water available for rice growing. Increased costs of production to produce a season’s crop. Lower world supply of rice due to poor climatic conditions in other exporting countries, increasing overall world market prices for medium grain rice. Higher processing costs due to lower throughput volumes. Industry was not able to take full advantage of better world market conditions due to a lack of domestic supply. Higher prices for rice flowed through into retail prices. Price Determination in the Australian Food Industry A Report 135
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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
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Observations The price comparison s
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Figure 46. Pork products, supply ch
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Figure 48. Value and cost-adding fr
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Supply chain management Wholesale m
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Figure 51. Fresh vegetables: Major
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FRESH HORTICULTURE - WHOLESALE MARK
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FRESH HORTICULTURE - ANALYSIS OF PR
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market access - in the United State
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The industry’s product mix The ke
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PROCESSED FRUIT AND VEGETABLES Anal
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Figure 69. Frozen vegetables, peas,
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PROCESSED PINEAPPLES - ANALYSIS OF
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Figure 75. Fresh fruit, with juice,
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GRAIN AND OILSEED PRODUCTS Analysis
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Figure 79. Flour, 1kg, supply chain
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Figure 82. Share of retail price of
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OILSEEDS - OVERVIEW Background The
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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 110 and 111: Projected export returns for the co
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 148 and 149: Price Determination in the Australi
Page 150 and 151: Oczkowski, E, Murphy, T 1999, Influ
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Price Determination in the Australian Food Industry A Report

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