Concerns about high currency values have become the norm for horticultural growers across the Southern Hemisphere, but in Australia the problem is compounded with much higher production costs than competitors.

Floods last season didn't make the situation any easier, but is there a way out of this rut? At www.freshfruitportal.com we catch up with Queensland industry body Growcom's CEO Alex Livingstone, who says niche markets, geographic diversification and a clean green image are the way to go.

Growcom CEO Alex Livingstone

Unlike its neighbor New Zealand across the Tasman Sea, Australia's produce industry is not very export-focused and looks mainly to its domestic market for revenue. This makes sense for several reasons; the population is growing and the economy - knock on wood - continues to be one of the most stable in the developed world.

Higher labor costs, a strong Australian dollar and extortionate inspection fees are added incentives to keep crops at home.

Livingstone says the high currency dollar not only hinders growers from turning a profit on exports, but has also played into the hands of cheaper imports, particularly with the processed category.

"In terms of increasing consumption of fruit and vegetables, we've seen Nielsen data that shows a 6% increase in value but 6% drop in volume of consumption, and the group which was dropping off the most was the family unit with a couple of teenage children," he says.

"It's a bit of a worry, and it seems that fresh produce is being replaced by frozen vegetables because of the convenience and speed – throw vegetables in the wok with the meat and the sauce and you’ve got a cooked dinner.

"The issue with that is that we don’t process many vegetables in this country any more. They're bought overseas, shipped in bulk, and the Australian dollar goes a long way when you’re buying product from overseas now, so we’re fighting a battle of fresh versus processed."

Profitability under pressure

Competitive issues aside, profitability is difficult with high labor costs and scarce selling options for producers, leading to a vicious cycle when it comes to labor attraction and meeting the funds needed for fresh investment.

"We’ve got an industry which is continuing to consolidate so the number of producers is reducing but the output is increasing - the profitability of the enterprises is being squeezed and you've really only got four places to sell; Coles, Woolworths, the central markets and food processors, and all of them are pretty well price-determined," says Livingstone

"The second issue is to enable agriculture to be an appealing career path for younger people coming through, rather than seeing their parents struggle and struggle to make ends meet for 30 years - it is not seen as particularly sexy industry, and therefore the number of graduates from horticultural production courses is very small.

"If you took an orchard and said the grower is going to replace 10% of his orchard each year over 10 years because he’s got new trees that double the yield, he has to invest the equivalent of 2.5 years of income in between years one and 10 and it could be until year 13 that he breaks even - if he can’t see that sort of time horizon for profitability, he can’t necessarily take the risk."

But to get ahead horticulture needs investment so it can reap the benefits of research and development (R&D), which is one of the things Growcom actively promotes. Weather events in recent years have pushed many farmers to their limits, which financially often rules out taking on R&D initiatives like new varieties, methods or trials, but there is a growing trend of geographical diversification to help ensure capital availability.

"Areas like Bundaberg are getting bigger and more productive, and that tends to diversify away some of the risk of having a lot of it in South East Queensland.

"Because we have a good north-south spread, we have producers who have tomato farming in Bowen, something in Bundaberg, and something further south down to the Lockyer here, and then they might have something down in New South Wales, so they can produce over a number of months, so if you've got very bad conditions in Bowen you haven’t lost everything.

"If you were thinking of joining this industry and you were looking at how to diversify your risk, you’d definitely be doing that instead of putting all your eggs in one basket."

Photo: Summerfruit Australia

New pastures

Production diversification is one thing, but finding new consumers is a completely different kettle of fish. But with careful planning, Australia has the capacity way to pave its way into new markets with different products.

Perhaps the country's competitive spirit with New Zealand - who has made itself one of the world's leaders in kiwifruit exports - could spur Australia on.

"New Zealand is very strongly export-focused, they have been for a very long time and they’re very good at it, and I suppose had we grown up with the same mentality that we have to be exporting and not just producing for our domestic market, then you’d probably see a somewhat different industry," says Livingstone

"There are opportunities, there's no doubt about that. For example Avocadoes Australia is finding export market potential, like a four week window when you can actually ship avocadoes to Mexico and get a good price for it.

"Then there are mangoes to India. It's the biggest producer the world as there’s almost a mango tree on every corner, but I believe there are opportunities at certain times of the year, if you have your production coming online and coming at the right time to hit that window.

"We can learn from overseas, we do need to become better exporters, but to take on the risk of things like exporting, you’ve got to have the money in your pocket to do it."

India, along with China, has become a strong focal point for horticultural growers for long term opportunities. To tap their full potential though, Australia needs to continue marketing its environmentally-friendly image.

"Looking at the high level, with the rise of the middle classes in China and India, they will be demanding good quality and consistent product year round - our geographic position to export to Asia as it expands is a good thing."

"You can rely on all the producers have to have food safety certificates which cover food handling, chemicals, the whole box and dice, and we have a very clean environment overall; our air quality is very high, people are using less and less herbicides and pesticides, so I think the niche and premium would be for a very clean and green product of consistent quality.

"The challenge then is to get it out of Australia and into the other country through quarantine and onto the shelves in really good shape."

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