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Vegetable growers allege 'non-binding' agreements with supermarkets create oversupply and waste

Every year Australians waste about 7.68 million tonnes of food — that's about 312 kilograms per person. And Australia's supermarket duopoly could be making waste worse, according to peak vegetable grower groups.

"Our biggest customer is the rubbish bin," one vegetable grower recently told the ABC. They said they didn't want to be identified for fear of retribution from Coles and Woolworths. "The supermarket lawyers scare us all," they said. Peak grower group AUSVEG said "the situation is so dire" that 34 per cent of growers were "considering walking away from their farming businesses". This powerlessness felt across the food-growing sector has been a theme throughout the ongoing Senate Select Committee on Supermarket Prices.

How does a duopoly affect waste?

According to AUSVEG, a peak body that represents thousands of vegetable growers, one of the biggest problems is that retailers (the supermarkets) are entering into supply agreements "where they nominate ‘forecast' weekly volumes, with no obligation to accept that forecast volume".

"A significant percentage of growers have shared that the full forecast volume in supply agreements is rarely ordered by retailers, and sometimes [it's] as little as 50 per cent," the group told the inquiry. Fresh produce is often marked down heavily to help move unsold fruit.(ABC Rural: Kath Sullivan)

This can be a disaster for farmers because, while it takes months to grow vegetables, once they're picked, they perish quickly. So the grower is then forced to either plough in the surplus crop or "dump" it on the open market, creating an oversupply, which in turn forces prices down.

"Retailers, who actively monitor prices in the wholesale market and buy from market agents, then advise the grower that the wholesale price is low, and therefore put pressure on the grower to accept lower prices," AUSVEG said.

Manipulating the market through supply agreements is a serious allegation, but one AUSVEG said was a concern raised among growers. "Many growers have confidentially informed AUSVEG that they believe deliberate market distortion is occurring," AUSVEG said.

"[But] as growers are not allowed to discuss their individual supply arrangements among themselves, they have little way of proving it."

Every year Australians waste about 7.68 million tonnes of food. A Coles spokesperson said the company "highly valued" its relationship with farmers, some of which spanned generations.

"We work very closely with our growers to determine the approximate quantities of produce we expect to purchase ahead of time so we can give customers confidence that they will be able to buy in-season produce at great prices," the spokesperson said.

"It also gives growers the confidence to grow crops with certainty that they will be able to meet demand while not creating an oversupply."

A Woolworths spokesperson said it shared customer demand details with "some of our growers to support their planning and planting decisions".

"Many factors contribute to industry-wide oversupply — reaching beyond the segment of growers we engage with," the spokesperson said. Surplus citrus in the South Australian Riverland, which was fed to stock.(ABC Rural: Kellie Hollingworth)

$30 million of rejected produce

Fruit and vegetables being rejected by supermarkets due to strict specifications also created millions of tonnes of waste, according to AUSVEG. 

"28 per cent of fruit and vegetable growers in a recent survey indicated that their biggest business concern in 2023-2024 was the amount of produce that was going to be rejected by commercial buyers over the next 12 months," the peak body said.

"[Almost a quarter] of commercial buyers often reject an entire pallet over one 'bad apple'."

AUSVEG said rejected produce cost farmers about $30 million a year, and there were suspicions about the reasons behind why some produce was rejected. 

"Growers also feel that many of these rejections are not due to quality, or failure to meet specifications, but because the retailer has overestimated the amount of produce they require," the peak body said.

"Growers have reported instances where just one marginally underweight pre-packaged item, has resulted in the rejection of entire consignments. A Woolworths spokesperson said it worked "collaboratively" with growers to support the sustainability of their businesses.

"Quality specifications ensure that our customers can buy fresh fruit and veg that will last at home with confidence," they said.

"Our specifications are routinely varied to support our growers based on seasonal conditions."

The Coles spokesperson said product specification was decided with growers, and it was committed to reducing food waste.

"We assess all produce for eating quality, ripeness, pest damage, appearance, and expected customer home shelf-life, and are deeply committed to balancing this with reducing food waste," the spokesperson said.

And during times of extreme weather and changed growing conditions, Coles said it would vary specifications.

"We also sell edible produce that may be flawed in appearance only … providing customers with great tasting, quality produce at great value prices," the spokesperson said. Food transportation is a major cause of greenhouse gases.

Climate cost far-reaching

The cost associated with growing more food than we need extends far beyond just farmers.

It unnecessarily increases the use of water, fuel, and fertiliser, and increases CO2 emissions. 

According to food rescue group, OzHarvest, globally, 10 per cent of greenhouse gas emissions comes from food that was grown but not eaten.

If wasted food was a country, it would rank as the world's third largest emitter of such gases, behind China and the US.

And according to corporate social responsibility expert, Associate Professor Bree Hurst, it's not just food being wasted that's the problem. Farm workers picking fruit in the field.

A 2021 report by the University of Sydney found that nearly half of all food emissions came from road transport.

"Globally, nearly half of food emissions come from road transport, with Australia sitting second in the world for the level of food transport emissions produced, one-third of which are from transporting fruits and vegetables," AUSVEG said in its submission.

Centralised distribution centres (DC) also mean some food travels along the same road twice.

"The theory around having central distribution centres (DC) is logical in many instances," AUSVEG said.

"However, there are multiple anecdotes of produce travelling thousands of kilometres to a regional DC, only to return to a supermarket just down the road from the grower."

Grower silence

The ABC contacted multiple fruit and vegetable growers, but no current farmers would speak due to concerns about how it might affect their business.

Some who have retired even remained concerned about what going public might mean for friends and family still in the industry.

Whether real or perceived, there is a general concern among farmers about possible retribution by supermarkets. Woolworths says farmers can speak up about concerns without fear of negative consequences.(Four Corners: Nick Wiggins)

With Coles and Woolworths owning 65 per cent of the grocery market, growers are financially reliant on contracts with them.

Both the big supermarkets say they value relationships with their growers, and Woolworths has even launched a Speak Up whistleblower service.

It also has a policy of Supplier Complaints Integrity Policy, which involves Woolworths managing director monitoring relationships with growers for 12 months following any complaints.

The solutions

To address the power imbalance between growers and the big supermarkets, all peak grower groups say there needs to be consequences for retailer misconduct. 

"The Australian Food and Grocery Code of Conduct (FGCC) must be made mandatory to provide growers with a viable mechanism to report the unconscionable behaviour of retailers without fear of commercial retribution," AUSVEG said.

The peak body proposed the appointment of independent arbiters, and broadening the scope of the FGCC and the Australian Competition and Consumer Commission (ACCC).

"And include strong penalties for bad behaviour, and compensation for suppliers detrimentally affected by retailer misconduct," AUSVEG said.

A Coles spokesperson said the retailer was instrumental in establishing the FGCC, and was one of the first to sign up in 2015.

"While participation in the code is voluntary, signatories — like Coles — are bound by the code once they have opted in," the spokesperson said.

A Woolworths spokesperson said growers' concerns were important, and there was an independent Code Arbiter available.

"It is important to us that growers let us know if things are not working the way they should, and they can absolutely do so without fear of negative consequences," the spokesperson said. 

Taken from the ABC News Media Release on March 13, 2024

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