Supermarkets, however, are keeping quiet about price rises, waiting for word from suppliers and complying with price signaling rules that prevent supermarket giants from making forecast price announcements where they could significantly undercut competition.
With homes still under water, roads closed and power out in parts of Victoria, New South Wales and Queensland, the recovery phase has only just begun. It will take weeks for the water to recede. Once that happens, producers can begin to assess the damage. They won’t find out for weeks.
Victoria Farmers Federation President Emma Herman.credit:Simon Schlueter
And for some, the worst is yet to come: Victorians living along the Murray River have been ordered to evacuate ahead of flooding forecast to reach levels not seen since 1993.
“Pretty much every type of agricultural production has been affected by the floods,” says Victoria Farmers Federation president Emma Germano, including horticultural crops such as apples, pears, stone fruit and vegetables. Previously planted seedlings are washed; the wet weather made it difficult for farmers to obtain fodder such as hay.
She said Chalmers’ 8 percent figure was “too broad” and too simplistic.
“I’d like to see the analysis behind it,” Germano said. “I wonder where they get those numbers from. There are farmers there who are waiting to see how much their crop losses will be.”
Meanwhile, grain farmers have learned not to expect the Bureau of Meteorology to be the bearer of good news.
“What we’re going to see is that some crops are going to be unharvestable and there’s going to be a decline in quality … that’s a loss of, say, $120 to $150 a ton in wheat milling, and then there’s yield loss, and then there’s crop disease ” says Grain Producers Australia chief executive Colin Bettles.
On the plus side, buyers won’t have to worry about bread availability, given that Australia exports about 70 percent of its total wheat production. But it’s still bad news for flood-affected farmers.
“Every drop of rain we get here is going to affect crop quality and yield,” Battles said.
The flood pushes the stretched supply chain to the brink
For some food supply chain experts, such as Edith Cowen University Associate Dean Flavia Macao, the recent flooding is the latest blow to a domestic supply chain that has been battered by drought, wildfires and the 2019-2020 Black Summer for the past four years. floods.
While the floods will put pressure on local food availability, increasing the risk of further food shortages, Australians have historically not had to worry much about domestic food availability, given that Australia is a key exporting country. But climate change has made the weather more temperamental. This variable exacerbated localized disruptions in the supply chain, leaving supermarket shelves bare for weeks on end, including a shortage of lettuce.
“The main characteristic of climate change is not that the situation is getting hotter, but that it is becoming more unruly,” Makau says.
The number of votes call on the government to adopt a national food security plan – which includes academics and industry leaders – is growing. Herman Victoria Farmers Federation is one of them.
“We keep having ‘oh shit’ moments,” she says. “We recover and stop talking about it and then something else happens.
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“We really need to have a holistic conversation about how these little things fit together in the supply chain to understand where our pressure points are and what is most important to increase from domestic manufacturing capacity.”
Turbulent business environment
The reality is that bad weather hurts business. Australia’s leading agricultural and food producers are facing pressure from almost every direction. Competition is fierce; input costs are rising; labor is hard to find; wages are growing – and this is without taking into account the wild weather.
And when that happens, both yields and stock prices suffer. Bega, Costa and Noumi were to issue stock market updates detailing the impact of excessive rains on operations and their profits. La Nina rain bombs this year have damaged oranges and tangerines in the Costa to the extent that it downgraded the citrus business. Its share price suffered along the way. Bega said this week that she is trying saved 2 million liters of milk from the Tatura sitenear Shepparton, the area’s power supply was cut off after the flood.
Food giants face an uphill battle trying to retain investor support. Last year, the share prices of Costa, Noumi and Bega fell by 28%, 43% and 55% respectively since the beginning of the year.
If businesses want to thrive, they have no choice but to adapt. Global wine giant Treasury Wine Estates is developing strategies for short-term events such as floods, fires or droughts, as well as long-term sustainability goals such as carbon neutrality by 2030.
“We’re spending a huge amount of time assessing climate change, understanding from analytics what it’s going to do to our growing regions and what we need to prepare for,” says Treasury Wine head of supply Kerrin Petty.
But it’s not just internal goals: the company aims to be an industry leader by working hand-in-hand with winegrowers. “We feel we have a responsibility to set the tone, to make sure we’re leading by example, but also engaging these groups.”
Companies with the most proactive approach to climate change mitigation will emerge victorious. In a way, they have little choice. “I hate to use a cliché, but at the end of the day it will come down to survival of the fittest,” says Dabney.
Former Costa Group chief executive Harry Dabney has returned to the helm of the board.credit:Wayne Taylor
Hip pockets continue to take a hit
If Australian shoppers were to look around the world now, they would see that food inflation could be worse. Australian Bureau of Statistics data showed food prices rose 2 per cent in the June quarter, compared with a 0.7 per cent jump in the same time last year, with sector inflation at 5.9 per cent over the past 12 months. Food prices in the US have risen by 11.2 per cent over the past year, in the UK by 14.6 per cent and in New Zealand by 8 per cent.
Despite this, analysts expect prices in Australia to continue to rise next year, and many of those predictions were made before this month’s floods.
UBS’s food price survey for the first quarter of 2023 suggests that overall food inflation will reach 8.2 percent for the quarter, with fresh food rising 9 percent.
“For the next 12 months, food inflation is expected to be 8.7 percent. We expect food inflation to peak [second quarter of 2023] as cost pressures remain,” Sean Cousins said in a note to clients.
The latest flooding will put further pressure on prices, experts say. A month ago, we expected a softening of the inflation rate.
“This will contribute to peak inflation,” says Rabobank senior analyst Michael Harvey. “Every part of the grocery aisle is under pressure.”
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Australian consumers have felt the ups and downs of product pricing this calendar year, and supermarkets know it. Like a humble iceberg lettuce and strawberry shortcake climbed further the $10 mark in some places, it was clear that shoppers wanted relief.
Coles and Woolworths have stepped up “price freeze” programs over the past few months in an attempt to bring some stability to the price of everyday items. More recently, IGA has also expanded its price lock program to include smaller stores.
Shoppers have had some price respite over the past month as supplies of hard-hit categories such as lettuce and strawberries have finally resumed, but it is unclear how the October flood will affect supermarkets.
This is partly due to the ban on price signaling, but also because supermarkets are working to assess the damage and waiting to hear about the consequences from suppliers.
Another surge in prices will affect not only buyers. The Australian foodservice industry is also in the grip of food availability, as seen this year when a lettuce shortage forced KFC to add burgers instead of cabbage.
Fast-food retailers such as Mexican food chain Guzman y Gomez are closely monitoring the effects of the recent flooding. Companies in this sector will have to balance product prices with rising ingredient costs to ensure customers still feel they are getting value for money, but franchises maintain a reasonable margin.
“Increased commodity prices and inflation are causing some chaos, so we review prices regularly,” says Guzman y Gomez founder Stephen Marks.
Festive mood, despite the gloom
Currently, the industry is well trained to be sustainable. And it’s not all bad news for consumers. Fruit grower Matthew Palise is optimistic about the good offer.
The director of Red Rich Fruits, which grows apples, pears, stone fruit and mangoes in areas such as Coldstream in Victoria’s north-east, does not expect the latest bad weather to lead to an immediate price increase. Instead, there are plenty of great deals on offer for shoppers in the coming months.
Red Rich Fruits director Matthew Palise says that while extreme weather is still a challenge for the industry, the produce is priced better per kg than many packaged foods, which are affected by inflation.
“You will have a supply shortfall if the rain continues … but at this stage we are excited about the opportunities that will open up,” he says.
The company is optimistic about offering a bumper crop of mangoes this Christmas, while cherries will also command a good price.
“You can still get a kilo of fresh produce for less than a latte.”
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