Interview with Angus Verley, ABC Country Hour


SUBJECTS: Food and Grocery Code of Conduct review; supermarket prices

HOST: Now, Federal Labor says it will use all options available to bring down grocery prices as it announces the appointment of former Labor Minister, Craig Emerson to head its review into the existing food and grocery code of conduct. But what will the review achieve? And could it actually lead to lower prices on supermarket shelves? And will it address accusations that the supermarkets are ripping off farmers and profiting at their expense? Ag Minister Murray Watt says supermarkets are underpaying farmers and overcharging consumers.

MURRAY WATT, MINISTER FOR AGRICULTURE, FISHERIES AND FORESTRY: Yeah, well I've been calling for several months now for supermarkets to do the right thing, both by farmers and consumers, because I think everyone can see it just doesn't pass the pub test for farmers to be being paid so little for their produce and consumers to be being charged so much. We have seen, in response to those calls, some action from supermarkets to drop some of their prices, particularly for things like sheep meat. But there's a long way to go. And what we hope to achieve through this review of the Code of Conduct for food and grocery industry is a lot more transparency from the supermarket chains and big retailers about what sort of prices they are paying producers. And that allows farmers to have a more level playing field when they're negotiating with wholesalers and retailers. But it also gives consumers a much bigger picture about what the sort of price differential is between what farmers are receiving and what consumers are paying.

ANGUS VERLEY, REPORTER: How can you achieve both things, though? How can prices be brought down on supermarket shelves for consumers and at the same time, how can farmers be paid more for what they produce?

MURRAY WATT: Yeah the primary focus of this review will be looking at, as I say, the level of transparency between retailers and their suppliers and wholesalers. And I think it will achieve a lot to really overcome that situation where farmers just don't really know what prices the farmer up the road is getting when they're selling their produce to one of the retailers, and therefore they don't really know what price to be charging the retailers and the wholesalers themselves. But I think that improving that transparency and making sure that all of us know what the supermarkets and retailers are paying and how they're conducting their business more generally, that will really provide everyone with a much clearer picture. And I think, at the very minimum, put moral pressure on the retailers to do the right thing when they're setting their prices in supermarkets. If everyone has a better idea that a farmer is getting a very low price for their produce, it's pretty hard for the retailers to be able to justify charging a lot more on the supermarket shelves.

ANGUS VERLEY: Are the supermarkets essentially ripping off farmers and profiting at their expense?

MURRAY WATT: I think that there are definitely cases where that's happening. And as I say, no one can really explain the prices that consumers are paying when farmers are getting so little. And I do think there are cases where farmers are being ripped off by the market power that the supermarket chains have, and wholesalers along the way as well. We've seen so many examples now where farmers are really getting below the price of production for all of their hard work, and someone is making a lot of money and it's people further up the chain.

ANGUS VERLEY: Just taking a step back, what actually is the Food and Grocery Code and what function does it perform?

MURRAY WATT: Yeah, so the Food and Grocery Code of Conduct has been around for a few years now and it's a voluntary code - which is one of the issues in itself, and we'll be having a look at whether we should make some of the obligations mandatory on the retailers and wholesalers. But what it's really designed to do is to regulate the behaviour of people in the food and grocery chain - supply chain and provide some level of transparency. But clearly it's not working the way it's going at the moment, because we don't have the level of transparency, and farmers don't have that sort of information flowing through to them from retailers and wholesalers, and that's why we think it needs to be reviewed. So, as I say, the way it's structured at the moment is it's a voluntary code. But it's quite possible that as a result of this review, we may see that some of the obligations on retailers to make more information public may become mandatory rather than voluntary. It may be that we see much more effective complaints mechanisms for farmers to be able to use if they feel they're being ripped off, and it may result in much stronger penalties against retailers and wholesalers who do the wrong thing. So they're the kind of things that we're having a look at through this review.

ANGUS VERLEY: Do you actually foresee tangible benefits for both consumers and farmers out of this review in that - will consumers see lower prices, will farmers see better prices?

MURRAY WATT: I certainly would hope so. I mean, that's the point of doing this review. As I said, I've met many farmers around the country who raise with me the fact that when they go into negotiation with the retailers and wholesalers, they don't know what price really to be charging because they don't know what the farmer up the road is getting. That leaves them in a very weak bargaining power. And so I think that if we can make sure that the retailers and wholesalers are being a lot more open about what they're paying, what sort of supply mechanisms they're putting in place. I think that will level the playing field and hopefully will return better returns to farmers. And equally, as I say, I think there's nothing better than a bit of sunlight to expose what large companies are doing, and that should benefit supermarket customers when they go and buy their weekly groceries.