Wednesday, 1 February 2012

Farmers' interests drowned in creeping globalisation

Residents in Griffith burning Murray
Darling Basin Authority plan, October 2010
Farmers appear to have no qualms about attacking the government, but the raised fist turns into a cat's paw when the time comes to criticise their largest customers, the retail giants.

Look at the image. It shows farmers from country round about near the Murray River burning the Murray Darling Basin Authority's plan when it appeared that the Labor government would retain in the river (in their view) too much water, leading to cuts to water allocations. Residents in the area grow crops through irrigation. It's not the only time farmers' frustrations at the government have been expressed strongly in the media. Similar ire was sparked last year when the Labor government temporarily terminated exports of live cattle to Indonesia following the showing on ABC TV of a program that revealed maltreatment of cattle in Indonesian abbatoirs. And, again, when the Labor government finally passed its carbon tax legislation in the House of Representatives, National Party leader Warren Truss could be heard across the back paddock fulminating generously against the government's success.

But representatives of fruit and vegetable farmers this week merely expressed reasonable disquiet when it emerged that retail powerhouse Coles, a unit of Wesfarmers, would reduce prices of fruit and veges by half. Today Woolworths, Coles' rival for the weekly food spend of urban consumers, said it would match the cuts. The price wars continue, it seems.

Wesfarmers and Woolworths are publicly-listed companies, so profits are important for their managers. While profits at these companies continue to grow, farmers continue to complain - on the back channel, in the background, if you like - that their incomes do not grow to match the cost of inputs and other expenses.

Bringing in produce from overseas is not, of course, a novelty for local growers. "We are already a net importer of fruit and vegetables," said federal independent MP Bob Katter today. And while the present deep cuts to prices for these consumables reflect recent good harvests, due to the La Nina effect that has delivered strong rainfalls in Australia, you wonder what will happen when the situation changes. Will Coles and Woolworths lift their prices or will they continue to look overseas for cheaper alternatives?

Structural changes in markets take place over the long term. The US opened up the manufacturing industry in China in 2000 by granting Most Favored Nation status to that emerging economy. The following year, China entered the WTO. As I wrote back in August:
Access to foreign markets then led to a shift in global trading patterns. At the time Clinton was pushing for China's acceptance by the world it was said jobs would be created in the US. What happened instead was the hollowing-out of the US industrial heartland. Both jobs and manufacturing capacity migrated to China.
If urban consumers lead the retail giants to pull down the shelf prices of fruit and veges, the logical long-term effect will be to push jobs overseas, to countries where wages are lower. Lower wages lead to cheaper produce. This kind of structural change is implicit in the notion of globalisation, as companies and consumers make rational choices - choices based on the rational self-interest of lowest cost - about where the products they buy are made.

So what can the government do about these changes? Today Opposition lightweight the shadow small business minister, Bruce Billson, made this comment in the same Age story quoted above:
''The concern that the Coalition has is that there's an enormous power imbalance in the supply chain, between the big supermarkets and smaller suppliers and where that market dominance is detrimental to suppliers in the longer term, consumers will also be disadvantaged.''
To say there's an "enormous power imbalance in the supply chain" is just the most extraordinarily wild understatement, but it's hard to imagine the Liberal Party actually doing anything about the situation even if they were in government because of their business-friendly attitude and their economic-libertarian tendencies. The National Party would huff and puff but in the end the views of the larger partner in the Coalition would win out. The Labor Party is unlikely to do anything because if it did it would be blamed for any price increases felt by consumers. It would fall to the Greens to support the agricultural sector in Australia, but they are unlikely to lead a majority government for the forseeable future. In coalition with Labor their views would also be smothered. But what can government do, anyway. Probably not much.

What can farmers do about this situation? Please leave a comment if you have an opinion.


Anonymous said...

You haven't mentioned any impact of "the middle man", is this because there is none and supermarkets buy direct? Do farmers have the opertunities to form a co-op or are these illegal? What about a weat board or national livestock association type of arrangement for farmers that the supermarkets have to deal with?

Jude the Obscure said...

This farmer helped start a weekly farmers market in our local small town which 10 years on has revived the fortunes of many small farmers and food producers in our region and pumped more than 100 million into the local economy. Direct action works. Banding together works. Do it yourselves because no-one else will.

Leslie Lim said...

You have done a great work. Thanks for making this blog. You helped me a lot on my research topic. Keep it up guys!