Supply and Demand

A recent post on facebook shared a photo of a famer with a ute load of sweet potatoes which he could not sell at market. There was an outcry about the poor farmer and the fact that many people would buy his wares despite how they appeared. There was criticism in the comments of Woolwoths and Coles and comments about how they should be boycotted etc, for not taking products based on appearance and how Australian farmers are basically being screwed by the “duopoly”.

As a wholesaler I regularly made up pallets of produce, zuchinnis, tomatoes, rockmelons and bins of pumpkin and watermelon for sale to Woolworths and Coles. Woolworths in particular was our biggest customer, comprising I would say, without ready access to figures, well over 60% of our business. Most wholesalers in Brisbane serve Woolworths, Coles and IGA and without their custom these businesses would not exist. It is true that the increase of these outlets has impacted on the prevalence of local fruit shops, but they provide value for customers that have supported their dominance in the market place. Fruit shops that have survived do an excellent job in providing value and quality produce, that looks and tastes good. Another factor that has impacted on the demise of many local fruit shops are so-called “Farmer’s Markets”.

A stall holder can set up a stall at a Farmer’s Market at a fraction of the price it costs a retailer to rent a shop front in a shopping centre or street strip-mall and has the potential to equal in one day what it takes a fruit and vegie shop to turn over in a week (depending on the size of the stall of course). I was working as a retailer at Superior Fruit in Graceville, Brisbane, when Farmer’s Markets were taking off in Brisbane and saw the effect first hand that Farmer’s Markets had on that business’ turn-over. As a wholesaler I regularly sold to these customers who gave the impression at point of sale that they grew all that they sold. This also occurs locally in the Byron Shire. I know of 2 stalls at regular Farmer’s Markets who do the same thing, both of whom have confided in me where particular produce comes from when they can not grow it themselves. It is easy for someone with my experience to pick what is not in season on a Market stall, so too can I pick the rhetoric I have overheard stall holders employ to make it sound like it is their produce.

When reading the comments under the sweet potato article it occurred to me how unaware people are of the forces at work that get fruit and vegetables from paddock to plate. So I’d like to share brief overview based upon my experience with the intention of creating awareness and hopefully provide a background as to why some produce is not accepted into the market and give some hope and maybe inspiration as to the opportunities this knowledge gives rise to.

Australian Produce Markets are over supplied due to the fact that Australian growers grow more food than Australian consumers can eat. What impacts this are extreme weather events such as cyclones, hail storms and in some cases drought. Dry weather can cause an oversupply as some growing areas rely on stored or underground water sources and the dry weather can provide perfect growing conditions as growers may have the ability to give plants the exact amount of water they need. Perfect growing conditions such as we have had in most regions over the last few months create an over supply, meaning that more product comes onto the market than what can be consumed. Depending on the time of year there is almost always something over supplied and the only way to sell it is to drop the price. Once the price is dropped as in the case of sweet potatoes at the time of the Facebook article there is less room in the market place for produce that is usually sold more cheaply such as Second Grade produce. This allows fruit shops to run specials and for the over supplied produce to be sold at a price that allows customers better value. Supermarkets will still be ordering the First Grade produce that sell well on their shelves but cafés may be able to buy a so-called better quality product for the same price they were paying previously for their cheaper Second Grade produce.

This over supply issue is what recently occurred with Sweet potatoes. There were so many sweet potatoes grown and so many that went to market that the large or mis-shappen produce that often gets sent to market in cardboard bins (to reduce costs of packaging in boxes) had no value in the market place. It would have cost more in freight for growers to send those products to market than would have been their return on sale from the wholesalers selling on their behalf. The tv news item the Facebook article was pinched from was in my belief an opinion piece that takes advantage of consumer’s ignorance of the ebs and flows of seasonal supply and demand and the fluctuating prices that result from this. Consequently it pulls at the hearts strings and the majority of people believe that farmers are being manipulated and are hard done by.

When an extreme weather event occurs that impacts supply a wholesaler will still have the same customers knocking on their door demanding produce. A reduction in supply means there is more demand than supply, meaning a higher sale price and a higher return for the grower. Wholesalers need to be skilful and diplomatic in providing what they can so as to keep customers on side for there will inevitably be a time when supply outstrips demand again and prices drop. Once prices drop customers can shop around for better deals and those that a wholesaler looked after when supply was low will often support that wholesaler when supply increases…at a price of course. Often when demand is greater than supply a Second Grade product can be worth as much as a First Grade product was worth just a few weeks before.

Ebs and flows are a part of growing, a part of selling and a part of buying. Often growers will risk growing a product early so as to supply produce at a time they know has a high chance of being of low supply and high demand so as to get a better price. And often growers will find their produce is suddenly more valuable than anticipated due to a hail storm, late frost or a cyclone wiping out other farmers produce.

My Uncle says, “Most Australian Farmers value their independence over their wellbeing”. This was in relation to a conversation we having about Holland, although being such a small country it is the 2nd largest exporter of fresh produce in the world. All produce is grown under protective cropping so weather does not effect output and almost exclusively all produce is sold through co-operatives and has a point of sale before it is even grown, with an over supply factored in for inevitable shortages that occur in the demand for their product.

Very little Australian produce is grown co-operatively or under protective cropping. Our over abundance of land and water, and Farmers valuing independence over wellbeing means that the ebs and flows of supply and demand will continue, with prices fluctuating due to seasons and extreme weather. Coupled with a news media and social media who like to sensationalise in order to sell, they will continue to misinform viewers. Hopefully next time some viewers will be better informed and have a greater understanding that over supply and low prices are inevitable and so too is a shortage of supply and higher prices, certainly until more growers work together and more protective cropping projects are undertaken. The opportunity therefore lies in locally grown, co-operatively owned sustainable protective cropping which can reduce the causes of fluctuating prices. We look forward to realising our dream to provide consistent quality produce at an affordable price and sharing our knowledge with those who care to listen.

By Isaac Robson