Australia could become a net importer of vegetables within three-to-five years, a situation paper released by the Tasmanian government has warned.
The paper said the issues facing the Tasmanian vegetable industry are complex and challenge the viability of growers, packers, processors and exporters. These issues will also impact on businesses that provide support servicece to the industry in regional areas of Tasmania.
The state's vegetable industry represents 20 percent of the value of agriculture. The industry faces many issues including competitively-priced imported products, high production costs, small production scale, supermarket buying policies removing brand recognition opportunities, displacement in traditional markets and legislation which does not support country-of-origin labeling. In relation to imported products, potential chemical contamination and level of sampling for testing also remain areas of debate.
Two large supermarket chains dominate the Australian retail food sector. Some 65 percent of vegetables sold within Australia go through the retail sector, and supermarkets dominate 75 percent of that sector.
The paper said imports of frozen vegetables into Australia have increased during the past 12 months and this trend is expected to accelerate as supermarkets and processors source even greater volumes from overseas in the immediate future.
Total vegetable imports were valued at A$73 million, with peas, sweet corn and mixed vegetables comprising 70 percent of that total. The value of frozen potato products may increase significantly due to McCain Foods (Aust.) Pty. Ltd. being awarded half of the Australian McDonald’s French fry supply contract.
The wholesale value of the lost production of processed vegetables and potatoes is A$90.4 million.
Based on figures collated by Simplot Australia Pty. Ltd., the gap between Australian and overseas competitors’ prices for some key commodities such as peas, potatoes and corn ranges from 19 to 116 percent.
Labor cost differences between Australia and selected competing countries place Australian labor cost as the most expensive at $33 an hour. While New Zealand is substantially cheaper at $23.10, labor costs in South Africa and Malaysia are only $6 and $4.80 an hour respectively. China has the cheapest labor at $1.27 an hour.
The high production costs and small scale of production units in Tasmania are cited by both processing companies as affecting the state’s competitiveness. McCain Foods’ average contract size in New Zealand is believed to be 7,000 tonnes, compared with a 700 tonne average in Tasmania.
At more than half of farm sales, potatoes are by far the largest component of Tasmania’s vegetable industry once packed or processed. Interstate sales of processed potatoes represent 70 percent of net interstate sales or 50 percent of total vegetable sales at the wholesale/export point. Only 2 percent of potatoes are exported.
The main processing potato cultivar grown is Russet Burbank. The total area of production for the processing potato industry has reduced from 7700 ha in 2003/04 and is projected to be 6,900 ha for the 2005/06 financial year. The tonnage produced over the last three years has reduced from 397,000 to a projected 367,000 tonnes for 2005/06.