No free lunch – or veges

The old saying, there’s no such thing as a free lunch seems particularly apposite in the supermarket wars debate. Let’s start by overlooking the immediate and rather appealing prospect of lower grocery bills and consider the context of food retailing.  We have what has been described as a two-horse race – a duopoly consisting of Coles and Woolworths. Yes, there are other players such as Aldi, but in the main, when it comes to food purchasing, we are in the hands of the two major chains. These chains purchase most of their produce from Australian suppliers, some of whom also export to other countries. In the global market there are food shortages and these shortages are becoming more acute. So worldwide food prices are currently increasing and will continue to increase, according to the most recent United Nations report.

Cole’s supermarket has been coming second in profits and share price to Woolworths for a decade or more. The past year has seen it introduce a daring price cut program to grab back share from Woolworths. This strategy seems to be working, with recent sales results showing higher increases for Coles than its rival.

So what does this mean for farmers? Given the nature of the dairy industry and long term contracts it may be too soon to tell if farmers are suffering from the lower milk prices. But if not today, then further down the track we may have a real problem on our hands. If farmers are not getting a fair return for their long hours of work, they will simply cease producing the food we need. The hidden statistics are those which reveal how many middle-aged farmers are selling up, as life on the land is not worth their efforts. What this means for Australia is that we may no longer be able to produce our own food. And will become subject to importing food from countries where prices are soaring.

There is a short-term gain for those on fixed incomes when prices of staples drop. But the short-term gain, in this case, is masking potential longer-term pain.

I think this latest round of price cuts is a very cynical exercise by a large company. As with the milk, the fruit and veg prices will be loss-leaders to drag in shoppers who will then probably be hit with hikes in prices on thousand of other products on the shelves.

To return to my opening statement, there’s no such thing as a free ride, lunch or ongoing cut-price milk, tomatoes or cauliflower. Beware!

Read what Melbourne’s Herald Sun has to say
Listen to the debate on the ABC where this has been described as a danger for consumers