Finance Consumer Farmers celebrate ‘best year yet’, but shoppers can expect to pay more for some groceries
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Farmers celebrate ‘best year yet’, but shoppers can expect to pay more for some groceries

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After years of hardship Australian farmers are enjoying their ‘‘best year yet’’, but consumers can still expect to pay more for fruit and vegetables – despite the record harvests.

On Tuesday, the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) forecast the value of farm production would rise by 7.8 per cent to a record $65.9 billion in 2020-21.

Peak industry body the National Farmers Federation said it was the “best year yet” for agriculture, with the industry now eyeing $100 billion of farm gate output by 2030.

NFF chief executive Tony Mahar said the record figures were
“a feather in the cap of our farmers”.

“With ongoing commitments from industry and government to growth, the future is bright indeed for Australian agriculture,” Mr Mahar said.

The agriculture industry’s bumper haul has been driven by major crops including wheat, coarse grains, oilseed and pulses, while “horticulture production is also expected to rise in value”, IbisWorld senior industry analyst James Thomson said.

However, the production value of livestock, wool and milk is expected to fall, he said.

So what does this mean for the prices consumers are paying on fresh produce and groceries at the checkout?

Fruit and vegetable prices to rise as pandemic bites

Consumers can expect to pay more for fruit and vegetables at the checkout due to the effect of pandemic-induced farm labour shortages, Mr Thomson said.

“Fruit and vegetable prices are expected to rise in 2020-21. Labour scarcity and rising labour costs due to border closures throughout the COVID-19 pandemic are expected to place upwards pressure on fruit and vegetable prices in 2020-21, with some of these increased costs passed on to consumers,” he said.

AusVeg spokesman Shaun Lindhe said vegetable growers had been hit hard by the pandemic labour shortages.

Table grapes, stone fruit and summer veg prices are forecast to increase.

“While growing conditions have been favourable in many regions, the industry’s crippling labour shortage is impacting growers all around the country,” Mr Lindhe said.

“Businesses need workers to harvest, package and transport fruits and vegetables from farms to consumers if the horticulture industry is to be a significant contributor to the agriculture industry’s goal of achieving $100 billion in value by 2030.”

According to ABARES, the reduced availability of harvest labour is forecast to result in reduced production of about 17 per cent for fruit and 2 per cent for vegetables in 2020-2021.

Prices for fresh produce including summer vegetables, stone fruit, and table grapes are likely to increase between 7 and 29 per cent in 2020-21, ABARES found.

“The price of fresh produce is, like many commodities, set by supply and demand,” Mr Lindhe said.

“As availability of fresh produce is impacted by lower production, through the industry’s labour shortage, the market will reflect this and prices will increase for impacted commodities for consumers.”

Beef prices high, but pork and lamb could be a bargain

Retail meat prices are also likely to “remain elevated in the short term”, Mr Thomson said.

While “increased production across the major grain crops is expected to place downward pressure on grain prices” will “likely flow through to lower feed prices for livestock farmers”, herd rebuilding is expected to “constrain meat production”, he explained.

Beef production is expected to fall by 16.9 per cent in 2020-21, according to ABARES.

Beef prices are high, but the cost of lamb and pork is falling.

“As a result, beef prices are expected to rise for consumers in the current year,” Mr Thomson said.

However, pig meat production is expected to rise “placing downwards pressure on prices” while lamb prices are “projected to fall from record highs in 2019-20”, he said.

When it comes to the dairy aisle, milk production is forecast to rise modestly in 2020-21, and consumers may reap the benefits.

“Farm gate milk prices are projected to fall slightly, which is expected to flow through to lower dairy prices for consumers,” Mr Thomson said.

“However, recovering demand in export markets could place upward pressure on domestic dairy prices, although this will depend on how quickly conditions normalise in export markets following the COVID-19 pandemic.”

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