News of a new price discounting offensive on fresh produce by Coles sparked a flurry of reaction from food and agriculture groups yesterday.

The National Farmers’ Federation called on Coles to demonstrate how slashing the price of fresh fruit and vegetables was not going to impact on the farm gate prices for Australia’s food growers.

NFF President Jock Laurie noted Coles announcement that it is cutting prices came on the same day that the UN released a report warning of the risk that not enough food will be produced to feed the world’s booming population.

As demand for food outstripped supply, increased investment in methods to increase food production was urgently needed, along with sensible decision making around policy areas that threaten agriculture.

“We need a long-term perspective on competing land uses, like mining and coal seam gas developments, that may reduce the amount of arable land available for agriculture.

“We need a strategic approach to water management to ensure that there is enough water available to achieve a balance between food production, rural communities and the environment. And we need increased investment in agricultural research and development to help our farmers boost their production levels.

“Ultimately, unless we can find a way to sustainably increase food production through such measures, consumers can expect to see food prices escalate as supplies fall further behind global demand.

“Perhaps most importantly, we need consumers to understand that a cut in their fresh fruit and vegetable prices may be good for their hip pockets in the short term – but not necessarily positive for the farmers who grow the produce.

“We are seeking iron clad guarantees that farm gate prices will not be slashed in line with this pricing decision by Coles,” Mr Laurie said.

The Australian Food and Grocery Council said the latest discounting was another why the Federal Government should appoint a Supermarket Ombudsman to enforce a Supermarket Fair Trading Code of Conduct.

AFGC chief executive Kate Carnell said it was concerning that the latest fresh produce price cuts were not being driven by supply chain competition or lower costs of production.

“If these current ‘price wars’ continue, the profitability of Australia’s food manufacturing sector, as well as farmers, will be eroded and the result could be a significant loss of both processors and producers,” Ms Carnell said.

“We’ve already seen the impacts of price discounting on food and grocery manufacturing – this latest move will obviously impact small producers and spells danger for manufacturing, jobs and regional communities.”

Ms Carnell said a regulated Supermarket Fair Trading Code of Conduct enforced by a Supermarket Ombudsman was required to create a more level playing field for primary producers and manufacturers in their dealing with Coles and Woolworths.

This important measure has been outlined in AFGC’s 2012-13 Federal Budget submission.

“Australia and New Zealand has the highest levels of supermarket concentration in the world, delivering significant market power to major supermarkets and making it increasingly difficult for suppliers to negotiate reasonable trading terms and compete with the growing levels of private label products,” Ms Carnell said.

“Over recent months, hundreds of job cuts have been announced due to the intense pressures facing the food and grocery sector.

“Australians and our political leaders overwhelmingly want a local, value-adding food and grocery manufacturing sector – it’s Australia’s largest manufacturing industry that we can’t live without,” Ms Carnell said.

Federal opposition agriculture and food security spokesman John Cobb said Coles decision was just “a marketing ploy” to get consumers into their supermarkets.

“It is normal for fruit and vegetable prices to fluctuate throughout the year. In fact very few foodstuffs vary as much in price throughout the year as fruit and vegetables,” Mr Cobb said. 

“I expect that Coles is just trying to take credit for the normal reduction in price at the height of the season.

“The Coalition will be monitoring the price cuts to make sure they are not trying to drive down farm gate prices as they have done with milk and eggs.

“The Coalition will work closely with industry to monitor the situation to make sure that price cuts don’t impact on the long term viability of farmers through unsustainable farm gate prices.

The Victorian Farmers Federation said the big supermarket chains should commit to an ethical sourcing policy when dealing with Australian fresh food producers.

“While the supermarkets’ latest round of discounting may be helping fruit and vegetable growers deal with an oversupply of produce, they must guarantee that growers will receive a fair return on their investment,” said Andrew Broad, VFF President.

“There remains a large gap between farm-gate prices paid by supermarkets and shelf prices paid by consumers.

“Growers will have no problem with the latest cut-price strategy as long as they are being rewarded for their investment.

“Coles claims that it’s able to get most fresh produce from gate to plate in 24 hours. If the supply chain is so efficient, why is there such a high mark-up on some fresh items?

“There are limited storage costs, and handling costs have been minimised – and often at the grower’s expense.

“Without sustainable business practices from our supermarkets that allow both parties to profit, growers will be forced out of business. The result will be less fresh food choices and higher prices for the consumer.

“If our supermarkets are serious about helping farmers, they need to commit to sourcing produce in an ethical manner by guaranteeing they will pay Australian food producers a reasonable price for their product,” Mr Broad said.