Horticulture profit margins: Factors affecting fruit growers’ bottom lines

How thin are fruit producer profit margins this season? We take a look at the myriad of factors affecting growers’ bottom lines.

First, it was a lack of labour that hit Australian fruit and vegetable growers. Now myriad factors have narrowed profit margins for horticultural commodities across the country.

The Weekly Times has compared the cost of production and the price consumers pay at the supermarket across a number of fruits. While it is difficult to glean the true cost of production, as conditions vary across the nation, industry sources said this season’s ­margins were looking skinny.

Avocados Australia chief executive John Tyas said the average retail price for avocados was $1.30 a piece, which was “unsustainable for the industry long term”.

At Woolworths last week, avocados sold for $1.20 each.

“A lot of growers are supplying avocados at or below the cost of production,” Mr Tyas said.

“That’s probably been since May or June this year.”

Avocados Australia chief executive John Tyas.

With a massive increase in the production volume, and lots of young trees coming into production, Mr Tyas said the market would likely be subdued for the foreseeable future.

“Our current forecast for next year is looking to be a lighter one at this stage,” he said.

“We’ve seen with these lower prices, and abundant supply, lots of new customers come into the category, particularly in the lower socio-economic demographic, when previously it was too expensive. We’re hoping we can retain those customers in the future.”

AusBerry farmers chief executive Miffy Gilbert said no two seasons were ever the same in the strawberry business, making it difficult to produce price forecasts.

She said any price over $2 a punnet at the supermarket was “a fair price”.

Strawberries at Woolworths last week were priced $3.40 per 250g punnet.

“We always make forecasts and put them to the supermarkets in terms of volume. Sometimes we hit the mark, and sometimes we don’t,” Ms Gilbert said.

“Most of our growers are still growing in the ground – not under cover – so we’re still at the whim of the weather.

“The cost of production in temperate growing areas is slightly higher, as there’s more labour involved in keeping the plant going.”

An Australian Banana Growers Council spokeswoman said the average cost of production for banana growers was about $20-$24/carton (13kg) or $1.84 a kilogram.

At Woolworths last week, bananas were selling for $2.50/kg.

“Supermarket prices fluctuate all the time, depending on supply and demand. At extreme best and worst times they can be anywhere between $45 a carton to $6 a carton,” the spokeswoman said.

An IBISWorld report said strong price competition among major supermarkets had “constrained industry revenue growth” to 0.3 per cent a year in the past five years.

Industry costs also lifted in the same period, according to the report, with farmgate fruit and vegetable prices also up.

IBISWorld senior industry analyst Sam Johnson said after years of severe drought, rainfall across Australia’s eastern states had boosted the output of some horticultural produce.

“Fruit and vegetables that are heavily mechanised in their harvesting and packing processes stand to benefit most from this rainfall,” he said.

“However, fruit that requires hand-picking, or smaller growers that can’t afford the scale of machinery required to automate their harvest, are likely to face constraints in getting their produce to market.”