Vegetable growers costs outpace production levels

Despite average vegetable production falling by 4% since 2005-06, vegetable cash costs have increased by 65%, according to a discussion paper released by AUSVEG today. The discussion paper draws from survey data produced by the Australian Bureau of Agriculture and Resource Economics and Sciences (ABARES).

“Australian vegetable growers have endured rising average total cash costs for much of the past eight years. Costs decreased in 2011-12 and 2012-13, yet growers’ returns are estimated to have fallen due to decreased production,” said Mr Kurt Hermann, AUSVEG, spokesperson.

Since 2005-06, average total cash costs for vegetable growers have increased by approximately 65% (in real terms), while average vegetable production per farm has decreased marginally by 4%.

“This clearly demonstrates that Australian vegetable growers are doing it tough and are under increasing pressure due to increasing production costs,” said Mr Hermann.

AUSVEG is the leading voice in Australian horticulture, representing 9,000 vegetable and potato growers.

“Reducing and managing vegetable growers’ costs of production is essential for increasing growers’ returns and ensuring the sustainability of the vegetable industry,” said Mr Hermann.

The discussion paper also finds that large growers (in terms of hectares produced) are able to produce vegetables at lower costs per tonne of production compared to smaller growers.

The discussion paper also investigates some of the major costs involved in vegetable production. Major costs include hired labour, which represents approximately 17% of vegetable growers’ total costs, and fertiliser and energy which contribute 9 and 8% respectively.

“High labour costs are affecting the profitability of growers, as vegetable production is generally labour intensive. Australia’s labour costs have grown more than twice as quickly as the OECD average and Australia’s manufacturing labour costs are ranked third highest internationally,” said Mr Hermann.

“Vegetable growers have limited ability to influence the price of inputs and will therefore need to keep battling with rising costs pressures. The key to reducing growers’ costs is to improve productivity and for growers to continue managing the level of inputs required to achieve an optimum yield,” said Mr Hermann.

21 February 2014