Price Determination in the Australian Food Industry A Report

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FOOD AND AGRICULTURE BUSINESS GROUP The Australian Government Department of Agriculture Fisheries and Forestry is the Commonwealth agency with portfolio responsibility for food production and processing policy. The Food and Agriculture Business Group facilitates integrated policy development, innovation and stakeholder engagement across the agriculture and food industries. The Food Policy and Safety Branch of the Group, which includes the Food Policy and Communications Section, develops and implements policy with the aim of facilitating a globally competitive, innovative and export oriented food processing and beverage industry. The section works cooperatively with and has regard to the mandates of the National Food Industry Council (NFIC), National Food Industry Strategy Ltd (NFIS Ltd), the Primary Industries Standing Committee’s food sub-committee, and industry. The section is also responsible for disseminating information to food industry stakeholders on issues of interest and importance including sectoral profiles, international and domestic trends, emerging issues, statistics, developments in food policy and programs, and decisions by government and food agencies. Contact details Food Policy and Communications Australian Government Department of Agriculture, Fisheries and Forestry GPO Box 858 CANBERRA ACT 2601 Telephone: +61 2 6272 4161 Price Determination in the Australian Food Industry A Report Email: foodinfo@affa.gov.au Internet site: www.daff.gov.au/foodinfo iv
CONTENTS Executive Summary 1 1. Introduction 9 2. Principal determinants of prices and costs in agrifood products 15 3. Analysis of the determinants of prices and costs in product value chains 19 Dairy products 19 The meat sector 36 Fresh horticulture products 53 Processed fruit and vegetables 66 Grain and oilseed products 74 Eggs 87 Sugar products 94 Rice 99 4. The performance of Australian food companies 106 5. Grocery retail 113 6. Issues for consideration 122 Competition and market power 123 Producer integration 124 Transparency and visibility 125 Value-adding and innovation 128 Adjustment 131 Bibliography 137 Price Determination in the Australian Food Industry A Report v
Page 1: Price Determination in the Australi
Page 4 and 5: © Commonwealth of Australia 2004 T
Page 8 and 9: FIGURES Price Determination in the
Page 10 and 11: Price Determination in the Australi
Page 14 and 15: • The current focus of retail cha
Page 16 and 17: • assertions as to market power i
Page 18 and 19: Overview - main drivers of prices i
Page 22 and 23: Food lines The analysis of food pro
Page 24 and 25: Figure 1. Overview of the approach
Page 26 and 27: Figure 2. Corporate profitability I
Page 28 and 29: Figure 4. Major drivers of prices a
Page 30 and 31: 5.3 The greater influence of prevai
Page 32 and 33: DAIRY - PACKAGED MILK Overview of t
Page 34 and 35: Figure 10. Whole milk, 2 litre, sup
Page 36 and 37: Prices through the chain Our analys
Page 38 and 39: Figure 16. Natural cheddar cheese:
Page 40 and 41: Farmgate prices Farmgate prices are
Page 42 and 43: DAIRY - ANALYSIS OF PRICING OF DAIR
Page 44 and 45: Figure 25. Dairy butter and blend s
Page 46 and 47: ‘Step-ups’ are paid by several
Page 48 and 49: THE MEAT SECTOR Analysis of the det
Page 50 and 51: The approach taken The pricing anal
Page 52 and 53: The changing value chains - various
Page 54 and 55: The approach taken Assumptions used
Page 56 and 57:
Figure 39. Lamb market sales, ’00
Page 58 and 59:
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 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 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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