Eggs and Chips

eggs-and-chips

Shady corporate players and governments have one thing in common – they all hate competition and if given half a chance they’ll side line their competitors and grab as much of the market power as possible.

In the worst-case scenario both will collude to gain the power or money that they crave, even if that means the consumers and voters pay the price. Along these lines, I have a strange but true story of this happening right here in Western Australia, involving two of our locally produced farm lines – eggs and potatoes.

The story starts way back in the 1930s when the state government in its wisdom, established statutory compulsory marketing authorities to take control of the production and sale of a wide range of farm produce, including potatoes, milk, wool, eggs, wheat and meat. Over the intervening years, the power of the market and consumer along with a good dose of economic rationalism has run these powerful authorities into the ground and they have all been abolished. The Egg Marketing Board was wound up in 2005 and the very last of them, the WA Potato Marketing Authority (PMC) was shut down in 2016.

I admit to being a player in the wind up of the PMC, which earned me few friends and many enemies along the way. It’s an interesting story which will soon be told in an ABC national radio program Sum of All Parts and should be compulsory listening for all those farmers who still believe in controlled marketing and the ability of governments to ensure a fair return to the farm gate and a fair price for the consumer. It’s just not possible which is why the market has ended up becoming the ultimate best judge of the balance between supply and demand.

For the potato growers it was either the end of the PMC with a cash payout or death with no cash, and it was a smart, well-run Potato Growers Association with their 70 or so members which negotiated and voted for, arguably, the best outcome of all of the statutory marketing wind ups across Australia. In the end they were awarded $14m in adjustment from the Barnett Government, which is $14m more than they would have received from the McGowan government, whose policy position was to end the scheme with no compensation at all.

But back to the story. One of the most interesting and colourful characters in the potato marketing deregulation fight was the owner of a chain of spud outlets who also happened to grow and pack his own potatoes, plus held a large amount of potato growing quota. Some say his quota was never quite large enough for the number of potatoes he sold, and although it was only an allegation, it was being pursued vigorously through the courts by all the other potato growers in the state with the backing of the Barnett government. He was also very close to the McGowan government as potato deregulation just happened to be one of their very few agriculture policies they had on their books.

Long story short, the quota system was eventually wound up, farmers got around $250 a tonne about 50% of the value of their license, which when compared to all other schemes such as milk and eggs, was a very good outcome. Those growers who had been cheating the system were not entitled to compensation as a result of their unfair black market trading. As part of the final wash up, industry went after the spud king for loss of income but unfortunately the court case which was backed by the Barnett government and when the government changed, that was the end of the case as the new McGowan government were not inclined to back those who had done the right thing.

That’s the chips story, now for the eggs bit. This is a similar story about many good players being undersold, one bad egg at a time, and a government that turned a blind eye to illegal and unfair behaviour in the market place. This is the same government which has called for an end to the production of all caged eggs by 2025. In response, the local egg industry points out that the market is highly price conscious and while urban soy latte-sipping types may be able to afford smashed avocado and free range eggs for breakfast, the outer suburbs just want a cheap bacon and eggs roll from their local servo as they drive to work. The home economic facts are that caged eggs are 20% cheaper to produce than free range eggs, and the majority of consumers are tight for cash and counting every cent.

Our Western Australian egg producers, like the potato producers, are almost all, good honest hard working farmers that produce eggs and spuds for the market and then market them as they are labelled. They don’t cheat the consumer by putting caged eggs into cartons that are labelled as free range, they respect the consumer and abide by the Department of Consumer Protection’s ‘Truth in Labelling’ laws.

However, the big corporate retailers are squeezing our local average egg farmers until they are almost unviable – all the while pocketing a large mark-up by charging a premium for free range eggs.

With the eastern states drought, the high cost of grain has sent most egg producers in WA close to the wall. All except one that is – because as always, it only takes one bad egg to destroy consumer trust and the profitability of all other growers by cheating the system. The government and the big retailers have allowed this behaviour to continue as thousands of cartons a week of caged eggs are packaged up as free range eggs. So suddenly a loss making business becomes a very profitable business indeed, so much so they can afford to pay fines like the $700,000 handed out in 2017 in a similar case.

While this may be good for that producer, and good for the big retailers, as they can keep forcing the price down on the other producers and drive out competition, it is terrible for consumer confidence in free range or in fact any type of specialist produce. Once the consumers lose confidence in the regulatory and quality assurance system, its spells the death knell for all those speciality producers of farm products such as organic or grass fed lines.

So while the good farmers continue to do the right thing and take their concerns of cheaters to government, nothing seems to happen. Just like in the potato game, the spud kings and the political king makers ignore those at the bottom of the food chain while they continue to live high on the hog at others expense. So it’s time for the government to step in and back the battlers and the honest egg producers and put the $1m in legal costs they saved by abandoning the potato king court case towards ensuring our Truth in Labelling Laws work for all growers of speciality niche products and the consumers who support them.

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