Avocado shortage reveals corporate mismanagement of Australia’s fruit production chain

Five years ago, a 5.5-kilogram tray of avocados sold for AUD$4 in Australia. Today, a single avocado goes for as high as $8. Like many fruit producers, avocado farmers across Australia have banded their efforts together under large corporate groups that coordinate marketing and schedule production to guarantee constant supply and steady pricing. The dangerous oligopoly-like influence of corporate groups like The Avolution revealed itself in a mid-January shortage that continues to fluster an Australian market that has grown fond of the avocado. If the effect of packing sheds in the stone fruit market can be any indicator, it’s the farmer who will absorb the brunt of these mistakes.
Aussies consume about 3.4 kg of avocado per capita per year. That’s more than three times the rate of consumption estimates throughout the 90s – about 1 kg of avocado per capita per year. Superfood fanaticism in the new millennium pimped the avocado for its good fats and meaty proteins. In the restaurant industry, more and more common Mexican and Japanese restaurants moved avocado in mass quantities. As the exotic delicacy developed into a regular dietary staple, it became clear to producers that this fickle fruit required delicate management to become a sustainable product. Any delay in production smashes the profitability of the avocado, which ripens quick, bruises easily and rots fast.
The avocado can grow across Australia. The country’s landmass presents diverse climates that can yield avocados throughout the year. With unified timing, this promises year-round supply. With poor coordination, a disastrous glut on the market tanks the avocado’s value. In 2011, overproduction dropped the avocado’s value (which even in steady demand sways irregularly between $20 – $40 per 5.5 kg tray) to $4 a tray. The fruit was fed to cattle or simply buried – not even worth the outgoing expense of its own sale. In this depression, producers turned to upstart marketing and production consultant groups such as The Avolution to combine efforts, regularize supply and drive up prices.
These corporations effect the market akin to packing sheds and often combine efforts. Packing sheds are overhead companies that amass fruit from many smaller farmers to sell to big-buyer chain grocery stores like Woolworths. A single packing shed, Delroy Orchards, moves around 50 million avocados each year. Sheds of this size have become a necessity because supermarkets control the to-customer aspect of the chain of productions. Without a diversified cohort of buyers, the producers are at the whim of their buyer and find themselves within smaller and smaller margins.
With the bulk of the demand at their control, supermarkets maintain the price of fruit at unshakable lows. This overjoys customers, who buy in turn buy more, at the chagrin of farmers forced to absorb the rising cost of doing business. Graeme Butler, a stone fruit farmer, estimated that the production price of fruit increased 40 percent across the board in the last ten years. “This includes things like freight, wages and superannuation, packaging, water, rates, fertilization and farm equipment. Butler relies heavily on packing sheds. They can operate at much smaller profit margin by amassing hulking stacks of product.
Corporate groups in the avocado market do not physically compile the produce, but hold cross-industry control on supply in order to manicure prices at constant levels. They run a contrived oligopoly like a locomotive. Coordinated marketing removes competition among producers. Stagnated supply attained through disruptive picking schedules drops product in regular intervals that manufacture a consistent, year-round demand. The avocado generally doesn’t ripen until picked, leaving much of its yield to human discretion. The effectiveness of this system can bear fruitfully or turn disastrously. Human discretion, of course, births human error.
Historically, Australian demand for avocados rises through December to apeak around Christmas and falls off heavily in the beginning of the new year. Farms in Western Australia yield avocados to the entirety of the nation’s market from November to February. This schedule drapes suppliers over a peak of demand and into the pursuant decline. In the past, each farmer’s supply profits in a variation relevant to timing. If too many farmers hold out through January, everyone sits on a useless heap of unwanted avocados. If a small number hold out wisely, however, they can profit from higher prices of off-season demand. This instance, at the behest of their consultants, the entire market moved its supply in unison. Suppliers shifted the bulk of their product to the before-Christmas period, artificially maintained a low-price, inflamed already high demand to nosebleed levels and avocados split out of grocery stores like cockroaches when the light comes on. In an odd tragedy, too many sellers got in on the gold rush and advanced planning brought nearsighted results.
Into January, rain showers and bushfires delayed picking schedules further and exacerbated the scarcity. Some venders invoked avocado limits: six per customer. In a suffocated effort to maintain relationships with regular customers, wholesale venders resorted to further inflating their own prices to extend their avocado stores. In the end, no section of the production chain profited as well as they probably should have. Third-party consultants, however, stand to lose little while farmers accept the blame and face an unhealthy market in the months ahead. It is entirely possible that this hiccup in supply will halt rises in demand. In an inevitability that’s familiar to the Australian fruit farmer, while corporate middle-men could offset inconsistencies in supply, their incorporation brought its own problems.
The packing sheds that mediate other sectors of the fruit industry fail farmers as well. While they can mitigate the pressures of controlled-demand, they cannot undo the effect of supermarkets on the industry. These packing sheds trade with a small number of powerful supermarkets and multitudes of small-scale farmers. These companies are themselves businesses who seek a profit, and bear no fiscal incentive to protect farmers against market trends. Ultimately, they serve the buyer rather than the supplier and their position is such that one-time decisions hold long-term effect for the producers.
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For example, supermarkets only purchase fruit of average size. The small cohort of buyers holds the power to deny non-average produce, whether too small or too large. So long as the packing sheds lack a diversified group of buyers, the supermarkets control the industry standards. Rather than take the loss of depreciated produce, now supply sheds themselves only accept fruit of average size and shift the undue burden onto their supplier. The farmers who have come to rely on packing sheds can only hock the (now undesirable) produce at depreciated rates to fringe buyers. Heaps of product goes to waste each year at cost to the farmer and further underscores the authority of suppliers. Farmers, like Butler, find their largest profit margin in exports to countries like China – a trade with stringent quality control and heavy tariff.
While middle-men can regulate instability in the fruit industry for Australian farmers, their mistakes will bear on their constituents. Furthermore, they lack immediate incentive to protect their suppliers from the pressures of massive corporate supermarkets rather than turn their own profit. The unhealthy lack of diversity in supermarket chains mirrors into the packing sheds and corporate groups. The bottom-line of these corporations will continue to pile pressure onto the endangered fruit farmer, and may have nowhere to turn once his demise rolls the weight back onto them.
“They too are managing increases in their outgoings and smaller producers won’t be able to continue to supply to them for such small margins,” Butler, a sixth generation fruit farmer predicts the industry will hit a wall at some point. “So it will end up being cheaper to just leave the fruit on the trees.”
Source: https://www.the-newshub.com/business/avocado-shortage-reveals-corporate-dangers-within-australias-fruit-production-chain

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