Additional Comments by Senator Nick Xenophon
1.1
There is no doubt that Australia's citrus industry is world class. Our
producers pride themselves on their quality products and it comes as no
surprise that demand for Australian citrus is expanding throughout Asia, the
Americas and Europe. However, the industry is on shaky ground. Increasing input
costs, the power of our supermarket duopoly, woeful food labelling laws,
barriers to export and cheap orange juice concentrate being dumped on our
market have all contributed to a reduction in the size of this citrus industry.
Export Issues
Access to export markets
1.2 It was clear from submissions to this inquiry that
access to export markets needs to be improved. As the committee noted, citrus
has been Australia's highest value fresh horticulture export for the past three
years, accounting for 31 percent of exports with a value of $162 million per
annum. In the Murray Valley approximately 50 per cent of all citrus produced is
exported. As the Riverina Citrus Growers explained:
Australia has a reputation of producing some of the best
citrus (especially Navel oranges) for the fresh fruit market. We are known for
our “clean and green” image and export markets are willing to pay a premium for
it.[1]
1.3 I agree with recommendation 6 made by the
committee that the Federal Government must allocate more resources into
finalising trade agreements with export destinations. In particular, attention
must be paid to drafting trading terms which are more beneficial to our citrus
exporters:
(China, Korea and Thailand) are relatively costly to supply
due to more stringent market access and protocol arrangements. These
impediments are both at a production level and at a regulatory compliance
level. Revised protocol arrangements similar to those with many of our existing
export markets would allow more rapid growth in the emerging markets.
Unfortunately, we do not enjoy similar protocol arrangements to those of many
of our competitors. This places us at a distinct disadvantage. Government assistance
in negotiating more favourable trading arrangements would be highly beneficial
to the industry.[2]
Export fees
1.4 Following the massive increase in export fees,
many producers were forced to consider whether it was economically viable for
them to export. Mr Michael Punturiero, who runs a citrus orchard in South
Australia's Riverland told the committee that he was unable to afford to pay
the new export fees which rose from $550 to $8,530 per annum, even if a rebate
was available. It was not practical for Mr Punturiero to have such a large sum
of money withdrawn from his cash flow.[3]
Furthermore, it was not clear to Mr Punturiero what additional benefits he was
receiving as a consequence of this massive fee hike:
Senator XENOPHON: Basically, you have got the same
packing shed, which is accredited, but the fees for accreditation have just
skyrocketed. Your packing shed has not changed—you are export accredited.
Mr Punturiero: Nothing has changed. It is only
two-hour service we are talking about—two hours is $450 and now they are
wanting $8,530 for the same two hours for registration on my shed.
Senator GALLACHER: Can we just put on record what the
$8,000 actually means? What do you see for the $8,000?
Mr Punturiero: I have asked that question and they
cannot give me an answer. They are just saying it is policy. It is the new cost
recovery.
Senator GALLACHER: What was costing you $450, there is
no difference in attendance, inspection or—
Mr Punturiero: It is exactly the same.
Senator GALLACHER: You get the same certificate.
Mr Punturiero: The same surface, same certificate,
same everything; no change.
Senator GALLACHER: But now it costs you $8,500.
Mr Punturiero: For exactly the same thing.[4]
1.5 The committee's recommendation on export charges
goes nowhere near far enough. It is intolerable that small and emerging
exporters have such disincentives and obstacles placed in their path. At the
very least there should be a sliding scale of fees and charges based on volume.
The user pays approach is a failure when it comes to small exporters, and is in
fact counterproductive in terms of Australia's long term export income.
Recommendation 1: The current 'user pays' approach for
small and emerging agricultural exporters be scrapped and replaced with a
sliding scale in order to encourage growth in export markets, particularly
niche markets.
Domestic Market Issues
Local market conditions
1.6 A large focus of this inquiry was the effects of
export issues on Australia's citrus industry. Spiralling electricity, transport,
storage and labour costs are pressures faced by all citrus growers. As a result,
growers are concerned that Australia is a competitive disadvantage in
comparison with other citrus producing countries like Brazil and the United
States. The Committee was told:
Employment and on costs contribute to approximately 60% of
the businesses costs. This is higher than many other crops and puts the grower
at a competitive disadvantage to international business who have lower labour
costs.[5]
Supermarket duopoly
1.7 We cannot overlook the home grown challenges
facing citrus growers, not only in terms of input costs but also access to the
domestic market. The South Australian Murray Irrigators Inc. told the
committee:
Concern was raised here with respect to access to markets and
this differed depending on the scale of the business. The emergence of citrus
production in South America and South Africa, and the domestic squeeze created
by two distributers, (Coles and Woolworths) holding 80% of market access. The
competition to supply to the other 20% is fierce and many have missed out being
unable to supply their fruit to any market at all. These businesses have lost
out financially. Fruit was not harvested at all as the cost of production (i.e.
labour to harvest) is higher than the price received.[6]
1.8 The bargaining power market imbalance between
growers and the two major retailers cannot be underestimated and places growers
in serious financial hardship:
Farmers enter contracts with juice processors for supply for
up to 3 years. These contracts are not negotiated as a group of suppliers, but
are given to growers individually to sign. Growers can feel intimidated by this
process and feel as though if they voice concerns that their contract simply
won’t be accepted.
Citrus like all crops can have yield variations between
seasons, in an “on” year growers with excess to their contract are at the mercy
of a spot price, which can be 1/3 of the contact price. It seems unfair that
the grower gets such a low price when the majority of excess fruit still ends
up in the same bottle and the same shelf at the same price as contracted fruit.
There needs to be some sort of contract class for over contract fruit that
correlates to it final retail use.[7]
1.9 It is clear Australian growers will continue to be
at the mercy of our major retailers until the Federal Government is equipped
with divestiture powers to break up this duopoly where there is evidence of
anti-competitive conduct.
Recommendation 2: That competition laws be amended to provide
for a divestiture power to break up a company where there is evidence of
anti-competitive conduct, including the imposition of unreasonable contract
terms.
Food Labelling
1.10 One of the biggest threats to the ongoing viability
of Australia's food production and manufacturing businesses is our manifestly
inadequate food labelling system. There are serious concerns about our current
labelling regime and the extent to which it allows foreign imports to be
classified as ‘Made in Australia’. Currently the test for a product to achieve
this classification is that it must either be ‘substantially transformed’ in
Australia or 50 percent of the total cost of producing or manufacturing the
good is attributable to processes that took place in Australia. We now have a
situation where imported orange juice concentrate is being passed off as 'Made
in Australia' after it is mixed with water and packaged in Australia, despite
the concentrate originating overseas.
1.11 Citrus Australia Ltd summarised the shortcomings of
our labelling laws:
Consumers also have a fundamental right to know where their
food comes from.
It was disappointing to see the government's lack of support
for a new country of origin framework, as recommended in Labelling Logic: a
review of food labelling law and policy 2011. Unfortunately, as country of
origin information on whole oranges (and other fruits) has improved, labelling
on packaged and bottled foods has not. A company can get around the Food
Standards Code by calling itself “Australian-owned”, but it could be making its
products offshore. It may also be stating something is “Made in Australia”,
when it is made from mainly imported foods that are then packaged here.
The industry is increasingly alarmed at how confusing and
misleading labelling on fruit juices can be for consumers. We are renewing our
calls for simpler and more accurate product information.[8]
Recommendation 3: The Federal Government initiate an
overhaul of Australia's country of origin food labelling laws to provide
truthful and useful information to consumers.
Importation of Orange Juice Concentrate
1.12 The importation of cheap orange juice concentrate
('OJC') being passed off as 'Made in Australia' has been the source of much
anxiety for many citrus growers in Australia. Furthermore, the Murray Valley
Citrus Board also raised concerns with the committee that OJC was entering
Australia at lower than cost price. I share their belief the onus needs to be
on the country exporting OJC to Australia to prove that they are not selling it
at less than the cost of production.[9]
Recommendation 4: Amend the Customs Act 1901 reverse the
onus of proof so as to require an importer to prove the imported goods have not
been dumped or subsidized for export.
Carbendazim
1.13 In 2012, OJC containing the chemical carbendazim was
dumped on the Australian market. As explained by Sunraysia Citrus Growers Inc:
This chemical had been banned from use in Australia for a
number of years with a zero tolerance. Last season carbendazim was found in
Brazilian Orange Juice Concentrate imported into Australia by a large
multinational beverage company. Use of this contaminated product had been
banned in the United States but was allowed in Australia. This double standard
is not acceptable. There is a serious credibility and integrity issue around
the decision. It is a blight on our chemical registration system and a fraud on
Australian consumers.[10]
1.14 The former Government's haphazard response to
concerns about carbendazim is symptomatic of the lack of understanding about
the threat to the industry and human health posed by the chemical. The
Coalition Government should seize the opportunity to correct the errors made by
the previous Government and ban the importation of OJC which contains
carbendazim.
Recommendation 5: That imported juice of concentrate
containing any level of carbendazim be banned.
Conclusion
1.15 I welcome and support the recommendations of the
committee in relation to this inquiry. As a nation I believe it is not too late
to address the issues facing our citrus industry, however action must be taken
as a matter of urgency. With Australia's manufacturing industry already in
crisis we must act now to ensure our food production industry does not face a
similar fate.
Senator Nick Xenophon
Independent Senator for South Australia
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