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Produce prices plunge

arrow, down, fallA new report published today by the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) shows that Australia’s domestic vegetable prices were 6 per cent lower on average in 2014-15.

The report, entitled Australian vegetable growing farm businesses, an economic survey, 2013-14 and 2014-15, was commissioned by Horticulture Innovation Australia using the National Vegetable Levy and funds from the Australian Government. The survey results are used to provide both industry and government with information about farm-level production and financial stability.

“Australian vegetable growers faced increased hardship in the 2014-15 season, with lower prices received for their produce translating into much tighter margins,” said Andrew White, Deputy CEO, Ausveg.

“The decrease in vegetable prices comes at a time when the costs of production have also increased by an average of 4 per cent since 2012-13. Decreases in the prices received for produce coupled with the increase in average farm costs have reduced grower’s margins and cash flow considerably,” said  White.

“Capital investment and productivity are particularly important this year given increasing production costs affecting growers’ bottom line. Vegetable growers simply do not have the cash on hand to support increased industry growth and productivity.”

The report indicates that average vegetable farm costs were $640,000 per farm in 2014-15 in comparison to $614,090 in the 2012-13 financial year. Furthermore, cash receipts from vegetable sales have fallen by 7.8 per cent from $774,900 in 2013-14 to $714,000 in 2014-15.

“Smaller sized farms tend to be the hardest hit by tighter margins as they generally have less liquidity on hand, therefore making it more difficult to obtain loans from financial institutions due to an increased perceived risk. Less access to funds means that growers are much less likely to be able to invest in future capital projects,” said White.

“The effect of these financial difficulties is likely to have been a factor in the 24 per cent drop in the number of small vegetable farms within Australia in 2014-15. Small business confidence is also much lower, with 21 per cent of existing small vegetable growers indicating that they are likely to exit the market completely next year.”

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