Simplot and Tasmanian Spud Farmers in Standoff over Rising Prices

Article by: Hari Yellina

Simplot, a food company, made a second price offer to farmers for their crop of potatoes this season, but they refused it. They claim that the additional $105 per tonne that the corporation has proposed is still insufficient to meet the approximately $20,000 per hectare cost of raising their crop this season. Farmer and contractor for Sassafras Scott Rockliff claimed that input costs, such as fuel and fertiliser, were skyrocketing. Sprays, diesel, machinery expenditures, and other expenses have all increased, according to Mr. Rockliff, and our growers cannot continue to produce potatoes at the current pricing. “The majority of us want to cultivate potatoes for the next 20 years, but if we can’t keep our costs under control, it will die naturally.”

John Williams, a potato farmer from North East Tasmania, felt that Australia’s rural and regional areas had been exploited for far too long. For chip aficionados, he claimed that paying farmers more was a non-issue. “For instance, at McDonald’s, a packet of chips can cost 2 cents. That’s not a lot of money,” he said.  “According to a Bunnings announcement, the price of a sausage increased by $1, from $2.50 to $3.50. As long as people are living, there will be no debate.” However, according to agricultural consultant David McKinna, it was not that easy. The majority of French fries are sold through fast food outlets like McDonald’s, all of which have international sourcing and pricing regulations.

Dr. McKinna stated, “We conducted a study in 2011, and not much has changed – the cost of production of raw potatoes in Australia is significantly greater than other nations, even New Zealand. “There are many causes for that. Australia’s cost of doing business is higher than other countries because of our higher labour expenses, higher government costs, and other factors. “They’re talking about 50 or 60 hectares [of potatoes] in Australia. It’s highly efficient; I’ve seen properties in Idaho with 5,000 hectares of [potatoes] and 18 row harvesters in use. When Simplot and McCain visited businesses like McDonald’s every few years to negotiate a price, according to Dr. McKinna, they were being cross-quoted against other nations.

Dr. McKinna stated, “We conducted a study in 2011, and not much has changed – the cost of production of raw potatoes in Australia is significantly greater than other nations, even New Zealand. “There are many causes for that. Australia’s cost of doing business is higher than other countries because of our higher labour expenses, higher government costs, and other factors. “They’re talking about 50 or 60 hectares [of potatoes] in Australia. It’s highly efficient; I’ve seen properties in Idaho with 5,000 hectares of [potatoes] and 18 row harvesters in use. When Simplot and McCain visited businesses like McDonald’s every few years to negotiate a price, according to Dr. McKinna, they were being cross-quoted against other nations.

“At some point, if the price here gets too high, it’s more financially advantageous for McDonald’s to obtain them from another nation or manufacturing,” he said. 140 potato producers are under contract with Simplot. McCain, a rival and manufacturer of frozen French fries, is also only starting to negotiate a new pricing with its 70 growers. This season, it hopes to contract for about 100,000 tonnes.